Is the HSBC MSCI Europe Islamic Screened UCITS ETF (HIPS) Halal? The Only Screened Fund Here That Is Not a Technology Fund, and the Oil Major Inside Its ESG Label: A Sharia Analysis for Muslim Investors (2026)

Author: Zaid Alissa, CTO and Halal Finance Researcher | Published: September 2026 | Updated: September 2026

Every Sharia screened equity fund in this series has the same shape. Remove conventional banks, insurers and lenders, then remove companies whose debt runs past a third of their assets, and what survives in most markets is technology. The iShares USA Islamic fund is 50.46 percent technology. The Invesco Dow Jones fund is 51.63 percent. The HSBC emerging market fund is 55.84 percent.

This one is 25.09 percent, and its largest sector is healthcare.

That makes it the single most useful holding in this series for a Muslim who already owns a screened US or global fund, because it is the only one that diversifies the sector concentration rather than repeating it. It also lends its securities, which is the subject of the article on its emerging market sibling and is summarised below rather than argued again.

Fund facts from the justETF profile for IE000AGFZM58, retrieved 4 September 2026. On 3 September 2026 stockanalysis.com reported 141 holdings, 125.84 million dollars of assets for the London line, a one year return of 21.42 percent and a price earnings ratio of 23.27. The two sources agree on the 0.30 percent expense ratio, which is more than they manage for the emerging market sibling.

They disagree about the name. One calls the fund an ESG fund and the other does not, exactly as with the emerging market version. HSBC's own asset management site refuses automated access, so no rename date or reason is stated here.

The top ten are 51.64 percent of the fund: ASML Holding 12.56, Novartis 8.32, SAP 5.50, TotalEnergies 5.03, ABB 4.48, Schneider Electric 3.98, AstraZeneca 3.74, L'Oreal 3.11, Sanofi 2.71 and Novo Nordisk 2.21. Those add to 12.56 plus 8.32 plus 5.50 plus 5.03 plus 4.48 plus 3.98 plus 3.74 plus 3.11 plus 2.71 plus 2.21, which is 51.64.

By country: France 21.68 percent, Switzerland 21.22, Netherlands 14.38, Germany 11.57, elsewhere 31.15. France and Switzerland together are 21.68 plus 21.22, which is 42.90 percent of the fund.

Six of the funds in this series have a sector split published by justETF from the same 30 July 2026 snapshot. Set them side by side:

HIPS is not marginally different. Its technology weight is 41.65 minus 25.09, that is 16.56 percentage points below the next lowest fund in the table, and 55.84 minus 25.09, that is 30.75 points below the highest. Healthcare leads technology inside the fund by 25.64 minus 25.09, or 0.55 percentage points, and industrials are a further 20.63 percent.

The reason is the universe, not the rulebook. The Islamic screen removes the same categories in Frankfurt as it does in New York. What differs is what is left standing: Europe's large listed companies are pharmaceutical, industrial and consumer businesses more than they are software and semiconductor businesses. Our full sector breakdown of the screen's effects sits in the article on the world version of the MSCI Islamic screen, which shows that going global only shaves nine points off the technology weight. Going European takes off thirty.

For a Muslim who already holds a screened US or global fund, that is the practical case for this one. It is the only fund covered here that offsets rather than compounds the concentration the screen produces.

TotalEnergies is 5.03 percent of the fund and its fourth largest holding, inside an index that one of the two data sources describes as an ESG Universal Screened Select index.

There is nothing inconsistent about that, and it is worth explaining rather than treating as a scandal.

A Sharia screen has never excluded oil and gas. The prohibited activity lists in all three rulebooks covered in this series name alcohol, tobacco, pork, conventional financial services, weapons and defence, gambling, adult entertainment and, in MSCI's case, music, hotels and cinema. Hydrocarbons appear in none of them. An energy company that passes the debt and income ratios passes the screen.

And an MSCI Universal ESG methodology is a tilting methodology rather than an excluding one. It adjusts weights by rating; it does not remove a sector.

The lesson is Ferri's, written about socially responsible indexes generally and landing squarely here: "Investors in socially screened ETFs should be aware of what industries are being screened out of an index. You may not agree with what is being called socially irresponsible" (The ETF Book, 2008, p. 242). An investor who assumed the ESG letters in the old name would remove fossil fuel exposure assumed something the methodology never promised. The fund did not mislead him.

Whether a Muslim should hold an oil major is a separate question and this article answers it carefully. No AAOIFI standard and none of the named scholars prohibits oil and gas as a business activity. An investor who chooses to exclude it is exercising a judgement of conscience or of maslahah, the public interest, which he is entitled to make. That judgement is not a prohibition, and the two should not be confused, because a prohibition admits of no degrees and a judgement does.

Allah says in Surah Al-Baqarah, verse 275:

وَأَحَلَّ اللَّهُ الْبَيْعَ وَحَرَّمَ الرِّبَا

"But Allah has permitted trade and has forbidden interest [riba]." (Saheeh International)

At company level the screen is MSCI's, and its thresholds are set out in the MSCI Islamic Index Series Methodology of December 2025: 33.33 percent of total assets for total debt and for cash plus interest bearing securities, with a 30.00 percent entry buffer and a 35.00 percent exit buffer, and 70.00 percent of total assets for accounts receivable plus cash. Business activity is capped at more than 5 percent of revenue from prohibited activities. AAOIFI's comparable threshold, as Mufti Faraz Adam sets it out in "Making Sense of the 30% Rule in Islamic Finance" (Amanah Advisors, 14 December 2020), is 30 percent of market capitalisation, a different divisor from a different rulebook, and the arithmetic of that difference is worked through in our article on the iShares MSCI USA Islamic fund.

At fund level there is one answer that matters and it is not favourable. justETF records securities lending for IE000AGFZM58 as yes. With its emerging market sibling, this is one of only two funds in this batch of ten that lends; the iShares Islamic funds, the Invesco Dow Jones Islamic fund and the iShares Physical Gold ETC all record it as none.

Ferri describes the mechanism plainly: lent stock "earns the investment firm a small interest fee for the duration of the loan" (p. 62), and fund companies use the revenue to offset expenses (p. 78). Mufti Faraz Adam identifies interest bearing securities lending as a defect in conventional exchange traded funds in his research paper "Solving the Dynamics of Shariah in ETFs and ETNs". The counter argument, that a loan of fungible shares against non interest bearing collateral is a different transaction, and the three questions an investor should put to HSBC before buying, are set out in full in the article on the emerging market sibling and are not repeated here. The answer applies identically to this fund.

AAOIFI Shari'ah Standard No. 31 on Controls on Gharar in Financial Transactions asks whether the object of the contract is adequately knowable. The Islamic screen underneath this index is fully documented by MSCI, the fund replicates in full so its holdings are the index, and the structure and adviser are named. What is not available is the provider's own page, the derived index's own methodology, and any detail of the lending programme. That is the same disclosure gap the emerging market sibling has and it is the weakest part of the product.

One point specific to this fund. Its index name contains no capping word, unlike the emerging market version's "Capped". MSCI's Appendix 5 states that derived indexes typically start from "the market capitalization-weighted (i.e. uncapped) versions" of the Islamic indexes, "prior to the application of issuer capping". So the Islamic series' 15 percent cap does not apply here and no substitute is announced in the name. Nothing turns on it today, since ASML at 12.56 percent has 15.00 minus 12.56, that is 2.44 percentage points of headroom to the level the Islamic series would have used. It would matter if a single European name ran further.

On maysir there is nothing in the structure: long only, physically replicated European equities, no derivatives, no leverage, no short positions. The indirect question raised by lending, whether a Muslim wishes his shares to be the ones borrowed by a short seller, is put in post 78 and applies here too.

Cost. 0.30 percent, agreed by both sources. Against Ferri's global market index median of 0.50 percent and custom international average of 0.55 percent (pp. 214 to 217), the fund is 0.50 minus 0.30, that is 0.20 percentage points below the median. No unscreened European tracker was retrieved for this article, so no screening premium in basis points is stated; borrowing one from another region would be a guess dressed as a figure.

Holdings and diversification. 112 holdings on the July snapshot, the narrowest equity fund in this series. IGDA holds 1,354, which is 1,354 divided by 112, or 12.09 times as many. Ferri's rule is that fewer holdings means more volatility and less of the diversification the index label implies (p. 144, p. 150), and the top ten at 51.64 percent bear it out.

Volatility. 14.17 percent in euro over one year, the lowest of the six funds in this series with a published figure, against 36.64 percent for the emerging market sibling and 17.65 percent for the iShares MSCI USA Islamic fund. A narrow fund is not automatically a volatile one when its holdings are European pharmaceutical and industrial businesses.

Currency. The fund's own currency is the euro, the only one in this series that is not dollar based. A sterling investor holding it carries European currency exposure rather than dollar exposure, and the analysis of what a trading line does and does not change is in our article on the currency line question, with the currencies substituted.

Size and age. EUR 144 million, launched 5 December 2022, the second smallest fund covered. Ferri's observation that "There is a critical level of assets needed to make a fund profitable" (p. 33) applies.

Portfolio fit. This is where the fund earns its place. Ferri's instruction to avoid redundant funds (p. 308) is the reason not to hold three technology heavy screened funds, and this is the one that is not. You can check the individual holdings against AAOIFI's own ratios with our stock screener, and if part of your portfolio sits in digital assets the crypto screener applies the same discipline there.

Securities lending. Set out at length in post 78, cross referenced rather than restated. Mufti Faraz Adam's published objection stands against a counter argument that turns on collateral facts the provider has not published.

An ESG methodology layered on a Sharia screen. An ESG rating system encodes value judgements that are not derived from fiqh and that change as its provider's view changes. Some Muslims welcome the overlap as a second filter. Others hold that a Sharia screen should stand alone, and that accepting somebody else's ethics as a bundle is a category error. Ferri's warning about not agreeing with what is called socially irresponsible cuts both ways here, and this article does not choose.

Energy holdings. No AAOIFI standard and none of the named scholars prohibits oil and gas as an activity. A Muslim who excludes it is making a judgement, and a judgement is not a ruling. This is the same distinction our article on the Halal Ninja stock screen draws about country based exclusions.

Buy this one for what it is not. If you already hold a screened US or global fund, you already own the technology concentration. This fund is the only one covered here that reduces it.

Ask HSBC the three lending questions from post 78 before you buy. The answers apply equally to this fund and they are not published.

Do not expect the ESG label to remove energy. TotalEnergies is 5.03 percent of the fund. A universal ESG methodology tilts weights; it does not exclude sectors.

Note that no capping rule is announced in this index's name. ASML at 12.56 percent has 2.44 points of headroom to the level the Islamic series would apply, and nothing constrains it above that.

Take the 112 holdings seriously. This is a concentrated European portfolio with more than half its money in ten names and 42.90 percent in two countries.

HIPS is the most useful fund in this series for a portfolio that already contains a screened US or global holding, because it is the only one whose sector profile does not repeat theirs. At 25.09 percent technology against 41.65 to 55.84 percent for the others, and with healthcare as its largest sector, it is doing work no other fund here does.

It is also small, narrow, undisclosed by its provider to any automated reader, and it lends its securities. The lending is the open question, it is the same question as its emerging market sibling's, and it cannot be closed without answers HSBC has not published.

This article is educational and is not a fatwa. Consult a qualified scholar for a ruling on your own circumstances.

Because Europe's large listed companies are different. The Islamic screen removes the same categories everywhere, but what is left in Europe is pharmaceutical, industrial and consumer businesses. The fund is 25.09 percent technology and 25.64 percent healthcare, against 41.65 to 55.84 percent technology for the other five funds in this series with a published sector split.

Yes. justETF records securities lending for IE000AGFZM58 as yes, the same answer as its emerging market sibling. Those two are the only funds in this batch of ten that lend. The objection, the counter argument and the questions to ask the provider are set out in the article on the emerging market fund.

Because neither of its two screens excludes oil and gas. No Sharia rulebook covered in this series prohibits hydrocarbons as a business activity, and an MSCI Universal ESG methodology tilts weights by rating rather than removing sectors. At 5.03 percent TotalEnergies is the fund's fourth largest holding.

No AAOIFI standard and none of the named scholars prohibits oil and gas as an activity, so the ordinary screening tests on debt and income decide it. A Muslim who chooses to avoid the sector for environmental or other reasons is making a judgement of conscience, which is his to make and which is not the same thing as a prohibition.

The index name contains no capping word, unlike the emerging market version's. MSCI's Appendix 5 states that derived indexes typically start from the uncapped version of the Islamic index, before issuer capping is applied. ASML at 12.56 percent sits 2.44 percentage points below the 15 percent the Islamic series itself would use, so nothing turns on it at present.

It is the narrowest equity fund in this series; the Invesco Dow Jones Islamic fund holds 1,354, which is 12.09 times as many. Ferri's rule is that fewer holdings means more volatility. In practice this fund's one year volatility in euro is 14.17 percent, the lowest of the six with a published figure, because European pharmaceutical and industrial businesses are less volatile than semiconductors.

The fund's base currency is the euro and its assets are European, so a sterling investor carries European currency exposure. Buying through a particular trading line changes the settlement currency, not the exposure, which is the subject of our article on the currency line question.