HSBC, Europe’s second-largest bank, deployed more than $130 million through its Islamic Global Equity Index Fund to purchase shares in multiple firms with ties to Israeli military operations, according to analysis of the fund’s first-half activities. The fund, which holds more than $8 billion in assets and primarily serves Muslim investors, markets itself as providing ethical investments aligned with Islamic law while delivering financial returns and societal benefits.
The purchases included significant stakes in several major corporations. Palantir Technologies received $38.3 million in investments; the data analytics company announced a strategic partnership with Israel’s Ministry of Defence and has faced scrutiny over technology used in military operations. RTX Corporation, the world’s second-largest arms manufacturer, received $35.7 million in fund investments through its Raytheon division, which jointly manufactures interceptor missiles and air-defense systems with Israeli companies. Additional investments included $20.3 million in Analog Devices, $18.9 million in Honeywell International, and $17.6 million in Rolls-Royce Holdings.
HSBC states that its Sharia Committee, composed of international Islamic scholars, oversees compliance with Islamic investment principles. The fund’s stated guidelines specify exclusion of companies with significant exposure to weapons-related revenue sources. However, academics and analysts have raised concerns about the apparent contradiction between these stated restrictions and the documented investments in military-linked firms.
According to Wahyu Jatmiko, a lecturer specializing in Islamic finance, the investments present “strong grounds to criticise HSBC’s governance, transparency, and handling of investors’ ethical expectations,” noting tension between stated investment restrictions and actual holdings. He characterized the situation as demonstrating broader challenges within the Islamic finance industry regarding the meaning and application of Sharia-compliant investment standards.
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