The Sustainable Finance Podcast: Ethical investments within an ESG Islamic framework

Rina Neoh, managing partner at Ficus Capital, the world’s first ESG Islamic venture capital management company, joined me to talk about the firm’s in-house Shariah financial structuring and ESG Islamic framework. 

Paul Ellis: Rina, welcome to the program. Would you please explain to our listeners what Shariah compliant venture capital is and how it differs from traditional venture capital models?

Rina Neoh: Everybody knows venture capital is investing in growth stage companies. And most of the investors expect a huge return because it’s a very risky investment structure.

But the clear difference between Islamic VCs or Shariah compliant VCs are basically that the VCs or fund managers have to follow the financing rules that is Shariah compliant, which means we focus on ethical investing, and we promote social justice.

For example, Shariah compliant funds avoid business activities involving alcohol, gambling, entertainment, pork and interest-based lending. Instead, we put extra effort to look at sectors that contribute positively to society, such as health care and education.

PE: I think it’s exciting that you’re taking the initiative to get ahead of the ESG curve in Malaysia. What is the current state of Shariah compliant venture capital in the markets in Asia and what opportunities do you see for growth?

RN: I think in the world there’s about 2 billion Muslims, and there’s really a lack of Shariah compliant financial products for this market. Of course, I need to reiterate that a Shariah compliant fund is not only for Muslims, and the companies that we invest in don’t necessarily have Muslim founders.

Global Sukuk previously was the only instrument that was available. Its issuance for the first half of 2024, I think reached about 170 billion already.

PE: How does Ficus ensure that the investments that you make are Shariah compliant on an ongoing basis?

RN: We are required to have a head of Shariah compliance in our structure, and that might cost a little more in terms of the fund set up, but by having that right, it actually minimizes a lot of risk, risk that is not being addressed with traditional VCs.

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