The Parmenion Group takes its role as fiduciary partner of its clients very serious. But at Parmenion Ethical we integrate Western-style ethical investing (based on the United Nations Principles for Responsible Investment; UN-PRI) and the guidelines derived from Islamic Finance (Shariah-compliant Investing) in such a way that our ethical approach is more than just a constraint when doing business.
Ethics is our business.
Through our activist investment approach, we like to contribute to good governance and the growth of socially-responsible, sustainable business across the globe.
Ethical and Islamic?
Western-style ethical investing (ESG) did already gain traction with some of the world’s major institutional investors and asset managers for quite some time now. The derivation of the UN-PRI is proof of that.
An ethical investment approach is not just a good thing as far as fairness is concerned. Even private investors, churches and endowments have discovered that the assumed ‘price to pay’ in the form of lower returns and/or higher investment risk is actually really not there. A growing number of academic papers as well as the performance of ethical funds indicates this.
But although Western nations, companies and scholars have over centuries assumed that they are the ‘conditio sine qua non’ of innovation and progress, the reality is that Islamic Finance incorporates a huge amount of everything that ESG investing is about.
Essential elements of the Islamic approach to investing are:
- the requirement of some level of risk balance between investors and investees;
- the prohibition of interest in its conventional, Western format;
- the quest for purification of investment income; and
- minimum solvency guidelines.
After the Global Financial Crisis of 2008/09 and beyond, these Islamic principles not only lead to more ‘fairness’, but also to a bigger resilience of financial institutions in a period of crisis.
For years, our key staff has been active in the creation of investment solutions in which both ESG and Shariah-compliant best-of-breed fund solutions play an important role. Our approach to asset allocation was one of the first to incorporate Islamic funds or securities within conventional solutions for the purpose of return enhancement and – above all – risk reduction.
With the creation of Parmenion Ethical we make the statement that it is now time to fully integrate the two approaches to ethical investing.
This will of course translate into a double set of filters and constraints. Our backtests however indicate that the number of investment opportunities available in the remaining universe is sufficient to derive quite an interesting shortlist. A shortlist, that will allow us a) to create portfolios with good risk-adjusted returns and b) to provide a ‘social and moral dividend’ as non-monetary add-on for the investor. Socially-responsible and ethical entrepreneurs will therefore benefit as well. The win-win for investor and investee does of course also benefit society-at-large.
Loosen the ties that squeeze, believe in the ties that bind
We are aware of the geopolitical and cultural tensions between people everywhere in the world, and the way in which extremists misuse religious texts for their own benefit (often through false interpretations that are misunderstood by outsiders, who fail to check things with acknowledged scholars and thought leaders). The large majorities of people with Islamic, Judeo-Christian or other background do however want to treat each other in a way similar to how they want to be treated and approached themselves. This translates into a basic climate in which ethical investing can bridge gaps between various communities.
Parmenion Ethical believes that its approach to business and the products we deliver can help increase the relative power of optimists with them becoming the avant-gardist leadership of the silent majorities across the world. We also fight against the cultural arrogance and superiority often exhibited in Western politics and media. Extreme passages in the Bible and acts of violence and cruelty in our history are often considered ‘yeah, but that was the past’ and ‘but that is of course symbolic’ type of events. Similar passages in other books like the Thora and Qur’an are then again often seen as literal indications of what the other religions and cultures are all about. Socio-economic evidence shows that with economic growth, increased travel and exposure to common people in other countries (and ongoing education) people have a better life and more to lose. This will then translate into the gradual decline of extremism. We also stress that there is a difference between extremism and religious piety; something often forgotten by liberal thinkers.
Today’s problems with the revival of Islamic extremism seem to defy this belief, but at Parmenion Ethical we disagree. (Neo-) colonialist tendencies in the West’s geopolitical approach in the Middle East, lack of knowledge about Islam (and betting on the wrong horses as a result of that!) in combination with extremist tendencies among Muslim youth outside the Islamic hemisphere explain what happened. And the recipe is to be found within the ethical traditions of both Western and Islamic societies, not outside of them.
Again: do not allow the skeptics a victory, and join forces with tie-binding scholars and thought leaders
in both camps.
Our Service Offering
Based on our set of beliefs, Parmenion Ethical will act as an ethical fund advisor, investor and philanthropy consultant for those institutional, private and family office investors that care for good monetary returns while at the same time enjoying a great social and moral dividend.
At the same token, our activist stand will help make our socially-responsible investees better entrepreneurs that can leave a bigger footprint within the societies that they do business in.