Saudi Arabia-based investment firm Sedco Capital has announced the first-ever Sharia-compliant funds with certifications on adherence to environmental, social and governance (ESG) principles.

"The Sedco Capital US Equities Fundamental Indexing Fund and Sedco Capital Global Higher Dividend Yield Fund take Sharia-compliance a step further by adding ESG certification," chief executive Hasan Al Jabri said on the sidelines of WIFFMC 2013 yesterday.

"By satisfying the socially responsible investing (SRI) criteria in our funds, the investor universe will quadruple," he said.

"This upgrade of the funds is a direct response to the significant and growing demand seen in the market for SRI solutions," he added.

"Sharia-compliance and SRI share a common goal - to create real value for economies and improve people's quality of life."

On what distinguished Sedco from the competition, he said the company focuses primarily on growth capital, as its 'sweet spot' from Sharia-compliance and returns perspective.

"We pioneered proprietary structures that enabled us to invest in conventional private equity managers while complying with Sharia guidelines, opt outs, co-investments, and parallel structures.

"In-house experience and substantial network were developed and to continue to innovate in such structures, and was able to broaden the investment universe based on experience and track record.

"In the wake of the aftermath of the 2008 credit crisis, particularly during the second and third quantitative easing periods, uncertainty on the health of developed economies prevailed in persistently very low interest rates environment. There was a need for higher dividends and value style investing," he said.

The company aims to expand its range of Islamic funds to more than 15, raising assets under management on its Luxembourg fund platform to $1.6 billion by year-end.

According to Al Jabri, equity still dominates the overall allocation and the industry needs new asset classes like private equity, infrastructure, and liquidity products.

The Islamic investment industry needs a three-pronged approach to broaden the investor base, he said.

"The industry needs innovation and diversification, track record and performance as well as strong distribution and reach," he added.-TradeArabia News Service