Developing ethical investment criteria based on Maqasid Shariah

Purpose This study aims to develop an ethical investment framework grounded in the Maqasid Shariah by integrating theological principles with real-world stakeholder insights. It responds to the growing demand for Islamic investments that move beyond formal compliance to address justice, sustainability and social impact, aligning with both Shariah and broader ethical investment imperatives. Design/methodology/approach A qualitative methodology is adopted, utilizing semi-structured interviews with 12 key stakeholders, including Shariah scholars, Islamic economists, Islamic bankers, Islamic fund managers, regulators and investors. The data were analyzed using inductive thematic coding via qualitative content analysis to capture the depth and complexity of interpretations of Maqasid-aligned investment principles. This approach allowed the study to draw upon lived experiences and institutional realities, rather than relying solely on theoretical constructs. Findings The research shows how Islamic finance principles encourage investment practices that correspond to ethical and socially responsible values mandated by Shariah. The Maqasid Shariah is a modern investment guide, establishing priorities for faith and wealth preservation while promoting environmental sustainability and justice. Maslahah represents public interest as a fundamental theme guiding investment strategies. A key insight is the emergence of a “faith premium,” where Muslim investors willingly trade-off financial returns for Shariah-compliant and ethically aligned investments. Participants also identified governance limitations – such as conflicts of interest in Shariah boards – and called for regulatory reforms and third-party Maqasid-based ethical ratings to strengthen credibility and impact. Ultimately, the research proposes a stakeholder-validated framework, where (a) Shariah screening ensures Riba-free investments; (b) Risk mitigation seeks to avoid risky ventures, thereby ensuring financial stability; (c) Sustainability promotes environmental benefits; (d) Social justice fosters equity by encouraging socially responsible enterprises; and (e) Governance improvements employ ethical ratings and transparency to enhance reputation and performance. Originality/value While earlier studies have proposed Maqasid-based investment models, this research provides an empirically grounded, stakeholder-validated framework that bridges the gap between ethical aspiration and operational application. Its originality lies in capturing underexplored dimensions – such as investor behavioral motivations, institutional governance challenges and the need for moral signaling mechanisms like ethical ratings. The framework enhances both academic discourse and practical tools for regulators, fund managers and investors seeking to align faith-driven ethics with sustainable investing.