During London Climate Action Week, GEFI convened, in partnership with Gatehouse Bank, HSBC Asset Management and UKIFC, a Chatham House roundtable on the future of Tayyib-inspired finance and its practical implementation.
While Islamic finance has established itself as a global industry exceeding US$6 trillion in assets, participants agreed that the next phase of growth will depend less on expanding existing market share and more on broadening the overall appeal of Islamic investment by demonstrating its wider value proposition.
Building on a Strong Foundation
Discussion reflected on how far the industry has progressed over the past decade. Early product development was often characterised by theoretical debate and establishing accepted interpretations of Shariah principles. Today, Islamic investment products have become increasingly sophisticated, supported by experienced scholars, established screening methodologies and greater institutional confidence.
Rather than revisiting questions of permissibility, attention is increasingly turning towards how Islamic finance can better reflect the broader objectives of Shariah through stewardship, sustainability and long-term value creation.
Listening to Investors
One recurring theme was that successful product development begins with understanding investor needs rather than designing products in isolation.
Participants described how investor engagement had revealed significant unmet demand across both institutional and retail markets. While ethical assets under management continue to grow, many investors still struggle to access diversified investment solutions that align with both their values and long-term financial objectives.
Feedback highlighted several recurring needs:
- broader access to trusted ethical investment products;
- multi-asset solutions suitable for different investor profiles;
- retirement and pension products designed around long-term investment journeys;
- improved education for both retail and institutional investors.
Rather than creating products simply because they could be offered, successful strategies were increasingly being designed around clearly identified client demand.
From Halal to Tayyib
A central discussion explored the distinction between products that are technically halal and investments that actively pursue Tayyib-inspired principles.
Participants suggested that Shariah screening establishes an important foundation, but stewardship increasingly represents the mechanism through which investments can become Tayyib-inspired. Active ownership, corporate engagement and ongoing monitoring allow investors to encourage better environmental, social and governance practices rather than relying solely on exclusionary screens.
This evolution reflects a shift from asking “Can we invest?” towards asking “How do we invest responsibly once we become owners?”
Many viewed stewardship as the natural next step in Islamic finance’s development.
The Role of Active Ownership
The discussion recognised important differences between passive and active investment strategies. Passive products provide broad market access and play an important role in expanding investor participation. However, active management was generally viewed as offering greater opportunities to influence corporate behaviour through engagement and stewardship. Participants highlighted examples where engagement had encouraged companies to improve environmental and governance practices, demonstrating how Islamic investors can contribute to positive real-world outcomes while remaining consistent with Shariah principles.
Expanding the Ethical Conversation
The discussion also explored whether existing screening approaches sufficiently capture emerging sustainability challenges. Participants reflected on the distinction between halal and Tayyib, arguing that while halal establishes what is permissible, Tayyib asks whether investments actively protect people, communities and the environment.
Coal emerged as a key example, with discussion focusing on its well-documented health, environmental and social impacts. Participants considered whether the ethical reasoning that has led Islamic finance to exclude products such as tobacco could increasingly inform approaches to fossil fuels. At the same time, it was recognised that there are differing interpretations among scholars and practitioners, particularly when balancing ethical considerations with energy access, development priorities and fiduciary responsibilities.
Rather than seeking universal agreement on every issue, participants highlighted the importance of developing practical frameworks that enable Islamic finance to respond to emerging sustainability challenges while remaining grounded in Shariah principles.
Collaboration Will Be Essential
A recurring conclusion was that the next stage of development cannot be achieved by individual firms acting alone.
Participants discussed opportunities for greater collaboration around stewardship, engagement and shared principles that could strengthen market credibility without compromising competition. Any collaborative approaches would need to be carefully designed within appropriate legal and competition frameworks, but there was broad support for developing common approaches that enhance rather than replace individual investment strategies.
The discussion also highlighted the importance of internal expertise. While ethical investing should not depend on any single background or perspective, practitioners with a deep understanding of Islamic principles can play an important role in helping organisations interpret emerging issues and communicate the broader purpose behind Tayyib-inspired investment.
Looking Ahead
The roundtable concluded that Islamic finance has reached an important point in its evolution.
Strong foundations have been established through decades of product development and Shariah scholarship. The opportunity now lies in demonstrating how Islamic finance can contribute to addressing some of today’s most pressing environmental and social challenges through stewardship, engagement and long-term responsible ownership.
Rather than focusing solely on growing the Islamic finance market itself, participants suggested that the industry’s future success will depend on its ability to offer practical investment solutions that appeal to a broader range of investors seeking both financial returns and positive societal outcomes.
The transition from halal to Tayyib is therefore less about replacing existing approaches and more about building upon them—moving from compliance towards a more comprehensive vision of responsible, purpose-driven finance.