Crescent Wealth & Responsible Investment? Q &A with RIAA

Crescent Wealth is Australia’s leading Islamic superannuation and investment fund, whose mission is to ensure all Australians can protect and grow their retirement wealth without compromising their core values, and beliefs. RIAA spoke with CEO Talal Yassine about the fund, its unique approach to responsible investment and growth strategy.

1. Can you tell us a bit about Crescent Wealth’s approach to responsible investment and how it relates to Sharia law / compliance? What makes your approach unique? 

Similar to socially responsible investing, Islamic investment filters out socially detrimental activities, such as gambling, adult material, alcohol, weapons, banking and insurance companies. In addition, Islamic investments filters out companies that are over leveraged. By following these Islamic principles, Crescent Wealth overlaps with much of the environmental social and governance (ESG) criteria set in the market. It mandates Crescent Wealth with investing with social values and having good governance, consistent with conventional responsible investing.

Islamic compliance also prohibits investments that rely on chance or speculation, rather than the effort of the investors. Normal risk-taking and related speculation is otherwise permitted, for example, assessment of a potential business model and the likelihood of its success. Thus, it provides the opportunity for managers to not compromise on returns, as there are enough assets to diversify and construct a risk-adjusted portfolio to generate adequate returns.

1. Your flagship property fund is one of the best performing property funds in the sector. What defines an ethical property fund for Crescent Wealth? 

Given that Islamic investment principals are closely aligned with socially responsible investment, our natural focus in sectors tend to be environmentally sensitive and sustainable infrastructure assets. These would include sectors such as aged-care, health-care and renewable energy. Although our direct asset exposure is in health care at the moment, we are not limited to these sectors. Our primary focus is on Islamic investment principles and on assets that generate adequate returns to justify the risk-adjusted return. Thus, we use the same criteria as a conventional investor would use, but we do not invest in property where the operation within the property is considered as inappropriate activities under Islamic investment principles.

1. You have called Australia’s shortfall in infrastructure investment ‘intergenerational theft’. What do you see as the current barriers to greater investment in infrastructure? 

Current barriers to greater investment in infrastructure come down to public policy and debates about fiscal and infrastructure policy. We are more concerned about meeting targets-based outcomes.

A good example of what we mean by intergenerational theft is to consider the Sydney Harbour Bridge and the Snowy Hydro scheme. Both infrastructure projects were envisaged, funded and built at a time when the ROI would clearly not be met in today’s terms and when there was only a handful of cars north of the bridge and less than a few million people in NSW, respectfully.

Our fore fathers were investing in infrastructure into the future; nation building at its best. Today we have reaped the benefits of these wise investments and forethought; and despite being wealthier than ever, on any measure, we have become experts at finding sufficiently plausible reasons not to do the same for future Australian generations. It’s called ‘intergenerational’ theft.

Indeed, we need to invest, plan and become the forward-thinking nation that the 21st century demands. This means encouraging infrastructure spend in Australia, funded by the public, through policies that involve the private sectors. More Government borrowing and collaboration with super funds could significantly change the dynamics and create more Public Private Partnerships. Financing through alternative platforms, including Islamic Finance, can also assist to further encourage investments in infrastructure through a greater pool of available funding.

1. What changes are you seeing within your member base and to what interest is there for responsible investment from members? 

We see two key changes within our member base: (1) the demographic is getting younger, (2) the interest in Islamically compliant investments is tied to an increase in attention on its synergies with responsible investment.  Although 90% of our members are estimated to be of the Muslim faith, the membership is made up of a wide spectrum of cultures and level of Islamic practice. However, the importance of responsible investing as a concern remains consistent throughout the membership base.

1. Islamic finance has been identified as one of the fastest growing area of finance globally. What is your vision of Crescent Wealth locally and regionally? 

The surge in Islamic investing over the last 10 years has been mainly for two main reasons; access to capital and established governance bodies. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that has set the accounting framework for Islamic investment principals. This has allowed more collaboration between organisations and countries that are taking part in Islamic investments.

As the first private Islamic pension fund globally, Crescent Wealth’s vision is to build upon its current position as a pioneer of Islamic investing in Australia. Regionally, Crescent Wealth’s vision is to become the flagbearer of Islamic investing in Australia for the region. We aim to develop products to be offered to regional clients wanting Islamic compliant investments in the Australian market.

Locally we aim to educate and familiarise our target demographic, and others on the viability and merits of Islamic investing as a suitable alternate to convention investments. through a collaborative spirit, by leveraging connections and by giving back to the community. Crescent Foundation, Crescent Institute and Crescent Think Tank are not-for-profits that are recipients of Crescent Wealth’s support; each is passionate about bringing great service in their respective field.

The Crescent Foundation is passionate about bringing a positive change to the Australian community. The Crescent foundation is a not for profit sister organisation of Crescent Wealth and is highly regarded for its leading work and impact. Its aim is to be the flag bearers on four major causes: education and refugees, civics, youth and democracy; helping the homeless & houseless; and the conservation of Islamic Art & Culture.

Crescent Institute is a non-partisan, secular and not-for-profit organisation operating nationally in our pursuit of a more well-connected, thoughtful and inclusive Australia. The Crescent Institute is a sister organisation of Crescent Wealth and has been operating for over 15 years. It works towards this through amplifying the professional impact of our attendees, empowering them a stronger professional and social network. It focuses on thought leadership and networking events; and in partnership with the Harvard Club of Australia, conducting the Future Makers Challenge.

Crescent Think Tank is a not-for-profit organisation with a purpose to produce leading academic works and bringing thought leaders and academics in the socially responsible investing industry together. Socially responsible CEOs, CIOs and other executives can learn and discuss responsible investment in a collaborative environment and execute ideas with the wider community. It focuses on holding a major conference/roundtables with thought leaders in responsible investing and producing various academic papers which are on point in driving our mission and which are open to the public and free.