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Investors today are increasingly seeking more than just financial returns—they want their wealth to reflect their values. Sustainable and ESG investing has captured global attention, but in the Middle East, Islamic, or Sharia-compliant, investing is rapidly gaining traction.
While both approaches align money with meaning, Islamic investing comes with additional complexity, requiring adherence to strict Sharia principles across the entire investment value chain. Habib Bank AG Zurich, traditionally a conventional bank, sees this as a significant opportunity. With inquiries for Sharia-compliant investment solutions steadily increasing among its clients, the bank has developed a carefully structured offering focused primarily on discretionary portfolio management, guided by external Sharia advisors and Swiss best practices.
We spoke with Dr David Wartenweiler, CIO at Habib Bank AG Zurich, to understand the bank’s approach, challenges, and how Islamic investing is evolving in the region. Here are excerpts from the chat.
What trends are you seeing among investors regarding purpose-driven portfolios?
Many investors today expect more than financial returns. Increasingly, they want investments that reflect their values, not just profit. In our region, Sharia-compliant investing is resonating with a growing demographic, much like sustainable and ESG investing globally. Both approaches align money with meaning, but Islamic investing is more demanding in its implementation.
Why has Islamic investing traditionally been limited in conventional banks?
Islamic investing requires strict compliance with Sharia across most of the value chain, not just selection criteria. Conventional banks often face challenges in ensuring complete integrity and transparency, which is why this space has mostly been dominated by specialist Islamic banks and asset managers. Many conventional private banks have been hesitant to enter this space due to these additional hurdles.
How is Habib Bank approaching these challenges?
As a conventional bank, we needed to ensure full compliance with Islamic finance principles at every stage. Credibility demands transparency with clients—not only what we can provide but also what we cannot. We engaged an external Sharia advisor to audit and approve our processes and obtained a Fatwa to ensure compliance. We decided to focus on discretionary portfolio management since this allows us to maintain full control over the value chain.
What changes have you made to your processes for Islamic offerings?
We’ve established separate processes for management agreements, investment processes, and segregated custody of all discretionary Islamic investment holdings. Certain conventional banking features were disabled to ensure strict compliance and integrity at all times.
How do you select investment instruments for Islamic portfolios?
Not all Islamic assets are suitable for investment management purposes. We focus on liquid instruments like sukuk and equities, both as single line items and in Sharia-compliant collective investments. Every instrument passes our financial screens and must meet Sharia criteria. Our external advisor is the final arbiter to avoid conflicts of interest, and periodic reviews ensure instruments are replaced if they no longer comply.
How do you balance Sharia compliance with delivering returns?
The ultimate goal remains to deliver the best possible returns to our clients. However, every decision is made strictly within the Islamic remit. By combining Swiss best practices with Sharia oversight, we ensure portfolios are both ethical and financially robust.
Read: Habib Bank AG Zurich: Strategies for generational wealth transfer
