At Halalstocks.co, ESG (Environmental, Social, and Governance) screening is a key component of our investment strategy, ensuring that your portfolio not only complies with Shariah principles but also aligns with broader ethical values. Below, we explain the process, its importance, and our specific approach to using ESG data for exclusions.

How Does ESG Screening Work?

ESG screening involves evaluating companies based on their performance in three core areas:
- Environmental: Assessing impacts like carbon emissions, resource usage, and sustainability practices.
- Social: Reviewing factors such as labour rights, community engagement, and diversity.
- Governance: Examining corporate leadership, ethics, and transparency.

We integrate this screening into our Halalstocks Edge™ strategy by analysing companies' ESG profiles alongside Halal and BDS (Boycott, Divestment, Sanctions) filters. This creates a values-driven portfolio that's updated monthly and seamlessly synced with your Trading 212 account.

Why Do We Do ESG Screening?

For Muslim investors, ethical investing goes beyond financial returns—it’s about aligning your money with your principles. Traditional Halal screening focuses on Shariah compliance (e.g., avoiding interest or prohibited industries), but ESG screening adds an extra layer of responsibility. It helps exclude companies involved in harmful practices, promoting positive societal and environmental impact. By incorporating ESG, we aim to deliver strong performance (our strategy has averaged over 16% p.a.) while giving you peace of mind that your investments reflect Islamic values of justice, stewardship, and fairness.

How We Use ESG Databases to Exclude Companies with Scores Above 30

We rely on trusted ESG databases (such as those from providers like Sustainalytics or MSCI) to gather comprehensive data on companies' risk exposures. These databases assign ESG risk scores, where:
- Lower scores (e.g., 0-30) indicate negligible to medium risk, meaning better ethical performance.
- Scores above 30 signal high or severe risks, often due to issues like environmental violations, poor governance, or social controversies.

Our process is straightforward:
1. Data Collection: We pull ESG ratings from these databases for thousands of companies.
2. Threshold Application: Any company with an ESG risk score above 30 is automatically excluded to avoid high-risk entities that could conflict with ethical standards.
3. Integration: This filter is combined with our Halal criteria, ensuring only low-risk, compliant companies make it into your portfolio.

This rigorous approach helps build a resilient, values-aligned investment strategy tailored for conscious investors like you. If you'd like to learn more about our full methodology or see performance data, explore the Halalstocks Edge™ on our site.