Investing with Purpose: Exploring Waqf-featured ETFs

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When it comes to investing, most people think of one primary goal: growing their wealth. But what if your investments could do more? What if they could also serve a greater purpose like funding community projects, supporting charitable initiatives, or creating sustainable social impact?

What Are Waqf-featured ETFs?

Investing with Purpose: Exploring Waqf-featured Exchange-traded Funds (ETFs) for Social Impact

Waqf-featured exchange-traded funds (ETFs) are a groundbreaking blend of charity concepts and investment vehicles.

At their core, Waqf-featured ETFs are exchange-traded funds designed to incorporate the principles of Waqf, an Islamic endowment dedicated to charitable causes. Traditionally, a Waqf involves donating a tangible asset or its income-generating potential think land, buildings, or cash to serve a community need. These assets are held in perpetuity, with their proceeds directed towards causes like education, healthcare or poverty alleviation.

Now, imagine combining that endowment and charity concepts with the flexibility and accessibility of ETFs. Waqf-featured ETFs pool investments from individuals and institutions, directing a portion of the income or returns toward designated charitable initiatives. The rest of the fund operates like a conventional ETF, providing investors with exposure to diverse asset classes and markets.

Why Investors Are Paying Attention?

Ethical investing has seen a massive surge in recent years, with more people looking for ways to align their financial goals with their values and moral principles. Waqf-featured ETFs offer a unique opportunity to do just that. Here’s why they’re catching the eye of socially conscious investors:

Dual Benefit: These ETFs enable wealth growth while contributing to societal good a win-win scenario.
Shariah Compliance: For Muslim investors, these ETFs provide an avenue to ensure investments adhere to Islamic principles.
Transparency: As publicly traded funds, ETFs offer transparency, allowing investors to monitor fund management and its social impact.
Accessibility: ETFs are known for affordability and ease of trading, making them suitable for investors at all levels.

As evidence, global sustainable fund assets reached an all-time high of USD 3.2 trillion at the end of 2024, marking an 8% increase from the previous year and more than quadrupling in size since 2018. Notably, European funds led the way, housing approximately 84% of these assets. This surge underscores investors’ unwavering commitment to channels that prioritise environmental, social, and governance factors, proving that even amid market shifts, sustainable investments remain a compelling opportunity.

Moreover, a significant majority of professional investors have adopted sustainable investment policies. A 2024 survey revealed that 80% of global investors have implemented ESG investment policies, aiming to minimise sustainability-related risks and capitalise emerging opportunities.

This trend is further supported by the increasing interest among individual investors. Research indicates that 84% of millennials consider ESG impact a central goal in their investment decisions, reflecting a generational shift towards value-based investing.

The introduction of Waqf-featured ETFs aligns with the global movement towards sustainable and responsible investing, offering Malaysian investors opportunities to engage in ethical investment practices that resonate with their cultural and religious values.

Profit Meets Purpose: How Waqf-featured ETFs Deliver Financial Gains and Social Impact

To truly understand the potential of these groundbreaking investment instruments, let’s dive into the reasons why they stand out:

Dual Impact Investing: These ETFs offer a unique twist by blending solid financial returns with a lasting social mission. For instance, the Eq8 FTSE Malaysia Enhanced Dividend Waqf ETF (EQ8WAQF) allocates half of its annual income distribution to waqf assets that fund projects in education, healthcare, and environmental sustainability , while the remaining half distributed to its unit holders. This dual approach means investors not only profit financially but also contribute to real-world social change.

Diversified Portfolio: Investors gain exposure to a mix of assets, reducing risk while aiming for consistent returns. The EQ8WAQF is benchmarked against the FTSE Bursa Malaysia EMAS Shariah Factor Enhanced Target Dividend Index, offering diversification across various economic sectors.

Transparency and Accessibility: One of the biggest advantages is transparency. With regular disclosure of holdings and performance metrics, investors know exactly where their money is going. Plus, ETFs are traded on the stock exchange, making them highly liquid and accessible—even for smaller investors. This democratises impact investing, allowing more people to participate in socially responsible financial growth.

Alignment with Ethical and Global Standards: Waqf-featured ETFs align with both Islamic principles and global sustainability goals. They draw on waqf concepts to meet modern financial standards and the United Nations’ Sustainable Development Goals (SDGs). This ensures that every investment not only adheres to Shariah compliance but also advances into broader objectives like poverty alleviation and community development.

The Era of Impactful Investment

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The introduction of Waqf-featured ETFs signals an exciting shift in how we think about investing. By blending charity concepts with cutting-edge investment instrument, these funds are creating pathways for ethical investors to achieve both financial growth and social impact. For those looking to make a difference while staying true to their values, Waqf-featured ETFs offer an innovative solution.

At this point, financial decisions increasingly reflect personal and societal values, and Waqf-featured ETFs prove that investing with purpose is not just a dream but a tangible reality. These funds offer a gateway to financial growth for experience or new investors, while making a meaningful difference to the community.