HSBC ‘sharia‑compliant’ fund spent over $100m on five Israeli military‑linked firms

HSBC’s Islamic Global Equity Index Fund bought roughly $130.8m in shares across five companies linked, in different ways, to Israel’s military or military operations. The figure comes from adding the article’s reported purchases. It matters because the fund is marketed as sharia-compliant, and most halal pension schemes in Britain are invested in it.

The largest purchase was $38.3m in Palantir. Other holdings included $35.7m in RTX, $20.3m in Analog Devices, $18.9m in Honeywell International, and $17.6m in Rolls-Royce. These figures describe purchases during the first half of 2026, not necessarily the fund’s total holdings.

The article also identifies a separate, pre-existing BAE Systems stake worth $386,784. That holding is not included in the $130.8m total. The figures raise questions about how the fund’s screening rules treat indirect military connections and whether those rules should change.

RTX bought shares by the fund include a company whose Raytheon subsidiary works with Rafael on Iron Dome interceptors. CAAT describes Raytheon as a significant supplier to Israel’s military, including missiles and components for F-15, F-16, and F-35 aircraft.

Analog Devices sent critical semiconductor components to Elbit Systems in 2024. Honeywell makes sensors and guidance devices, and an inertial measurement unit it manufactured was found in a missile used in a 2024 Gaza school attack. Rolls-Royce produces engines for Merkava tanks and Israeli ships, while its US business became a contractor for Eitan armoured-carrier engines.

Palantir announced a partnership with Israel’s Defence Ministry in 2024 for war-related missions. The article links its technology to drone-fired missile operations and cites a UN report about automated battlefield decision-making. These connections show different routes from corporate products to military use.

In Islamic finance, sharia-compliant investing generally means following principles derived from Islamic law. Funds commonly avoid interest-based financial activity, gambling, alcohol, pork-related businesses, and excessive uncertainty. Many also apply financial screens covering debt, cash, and interest income. The article does not define HSBC’s standard or list its prohibited sectors.

Weapons can be treated differently under various Islamic investment approaches. Some screens exclude weapons companies broadly. Others focus on particular weapons, revenue thresholds, or companies whose main business is defence. A fund may also review companies individually rather than treating every supplier as prohibited.

That variation matters here. The article reports holdings in companies connected to missiles, military equipment, surveillance, and defence contracts, while HSBC’s fund remains labelled sharia-compliant. Understanding the label therefore requires examining the fund’s actual methodology, advisers, exclusions, and thresholds rather than relying on the label alone.

A sharia-compliant classification depends on the screening rules used, not on a universal agreement that every connected activity is acceptable. A screen might examine a company’s main business, reported revenue, financial ratios, or direct involvement in prohibited activities. It may not capture every subsidiary, supplier, contractor, or customer connection.

For example, a semiconductor maker may sell components across many industries while one customer supplies a weapons manufacturer. A conglomerate may make civilian products alongside military sensors. Under some methodologies, those indirect links could fall outside an exclusion or below a revenue threshold. The article provides no evidence that this is HSBC’s precise reasoning.

The gap creates a transparency issue for savers. Investors may understand “sharia-compliant” as excluding military involvement altogether, while the fund may apply a narrower technical test. The article reports that criteria “can and should be changed,” but does not identify a revised policy or timetable.

For Muslim pension savers, the central concern is whether their retirement contributions match their ethical and religious expectations. The article says most halal pension schemes in Britain are invested in HSBC’s Islamic Global Equity Index Fund. That means the reported holdings could affect many savers indirectly, even if they did not choose the individual companies.

The fund purchased shares in RTX, Analog Devices, Honeywell, Rolls-Royce, and Palantir. The article connects those companies to missiles, military components, engines, surveillance, or Israeli defence operations. Holding shares gives the fund an ownership position and exposes pension money to the companies’ financial performance, though the article does not quantify any individual saver’s exposure.

Possible consequences include demands for clearer screening, investor complaints, or pressure to remove or review holdings. Savers may also seek alternative pension options if they believe the fund’s standards do not match their understanding of halal investing. The article reports calls for the criteria to be changed, but no change is announced.

Islamic investment screens are normally established through a fund’s governing methodology. This can involve the fund manager, a sharia supervisory board or adviser, and the provider of the index the fund tracks. The article names HSBC’s Islamic Global Equity Index Fund but does not identify the people, board, or organisation that approved its detailed criteria.

HSBC is responsible for operating the fund and publishing information about its holdings. If the fund follows an external index, that index provider may also control company eligibility. Sharia advisers can interpret Islamic principles, while formal changes usually require approval under the fund’s governance documents. These roles can vary between funds.

The practical power to change the rules therefore depends on the fund’s structure and contracts. HSBC, its advisers, and any index administrator may have different responsibilities. The article’s statement that criteria “can and should be changed” signals pressure for review, not proof that any particular actor has already changed them.

When a fund buys shares, it becomes an owner of part of a company and commits investors’ money to that company’s market value. Share purchases can increase demand for the stock, support liquidity, and provide existing owners with a buyer. The financial effect of one purchase varies, but ownership creates exposure to the company’s success.

The connection does not require the fund to buy weapons directly. RTX’s Raytheon subsidiary works with Rafael on Iron Dome interceptors. Analog Devices supplied components to Elbit Systems. Rolls-Royce produces engines for Israeli military vehicles and ships. Honeywell makes guidance equipment, while Palantir provides military-related data technology.

These examples show how corporate structures and supply chains can carry a military connection through subsidiaries, components, contractors, or partnerships. The article does not calculate how much of each company’s revenue comes from such work. It does show why screening only direct weapons manufacturers may leave indirect exposure in a portfolio.