How Ethiqly screens stocks and funds

A company fails outright if its core business is prohibited, however healthy its accounts. The prohibited activities are:

• alcohol: brewing, distilling, wine-making, and pubs and bars;
• tobacco;
• gambling: casinos, betting and lotteries;
• adult entertainment;
• pork;
• conventional, interest-based finance: banks, lenders and insurers (Islamic finance and takaful are exempt);
• weapons and defence manufacturing.

We check several independent sources, and any one of them can fail the company:

• the sector and industry classification from our market-data provider;
• for SEC filers, the SEC’s own industry code (only the codes that are prohibited on their own, such as malt beverages, distilled spirits and tobacco, and not broad ones like “beverages”);
• for UK companies, the SIC codes registered at Companies House, where available;
• the company’s name, when it contains a word that settles the matter, such as “brewery”, “distillers”, “tobacco” or “casino”;
• a short, maintained list of companies whose core business is prohibited but which the classifications above miss, for example a whisky maker labelled as “beverages” or a casino operator labelled as “hotels”. Each entry names the activity, and that reason is shown on the stock’s page.

The screen fails closed. If we have no business information at all, the company does not pass by default: it gets no verdict until we do. A holding-company or dormant code on its own doesn’t count as business information.

A permissible business must also pass three financial tests. Each is a percentage, and the company must be strictly below the limit: a company sitting exactly on a limit is not certified.

The tests have equal weight. None is treated as more conclusive than another: if any one fails, the company is not compliant.

We also show receivables as a share of market capitalisation, against the 45% limit some other standards use. It is for reference only. We have found no receivables test in the current AAOIFI standard, so it never decides a verdict.

We never estimate a missing figure. If a number the screen needs isn’t in the filings, that test stays open and the verdict says why. A figure whose period ended more than about two years ago is treated as missing, not as current.

US companies

• Debt, cash, investments, receivables, revenue and interest income come from the company’s filings with the SEC, read through SEC EDGAR. For a small number of the largest companies, balance-sheet and revenue figures may come from a third-party fundamentals provider instead.
• Revenue and interest income cover the latest twelve months: the latest annual figure, plus the current year to date, minus the same period a year earlier. When those don’t line up, we use four consecutive quarters, or else the latest full year.
• The balance sheet as printed in each filing, from the SEC Financial Statement Data Sets, is used to find debt filed under a company’s own labels and to prove zero debt (see the careful cases below).
• Foreign companies that file annual reports with the SEC (Forms 20-F and 40-F) are read the same way, from their IFRS figures.
• Market capitalisation comes from third-party market-data providers.

UK companies

• Figures come from the company’s annual report in the ESEF format (the UK’s machine-readable annual report), via filings.xbrl.org. Income figures are for the latest financial year.
• Market capitalisation is the latest closing price multiplied by the total voting rights in the company’s own most recent Total Voting Rights notice, from the FCA National Storage Mechanism. That figure already excludes shares held in treasury. A notice more than about 13 months old is not used. With no usable notice, we use the share count tagged in the annual report, if there is one, and otherwise the market value from our market-data provider.
• Prices come from third-party providers. The share count is always filed: we never work it out from other figures.
• Companies are matched to their filings using reference data from GLEIF and OpenFIGI.

Other European companies

• Companies listed in the EU, Norway, Iceland or Liechtenstein file their annual report in the same ESEF format, and we read it the same way, via filings.xbrl.org. Only the annual report is used, never a quarterly or half-year report.
• A listing is matched to its company only when its name and country point to exactly one entity in GLEIF’s register, and that entity files ESEF reports. If there is any doubt, the listing stays Under review: a wrong match would be worse than none.
• Market capitalisation is the market value from our market-data provider, converted to US dollars at the European Central Bank rate.

Funds

• Holdings and their weights come from the fund’s latest Form N-PORT filing with the SEC, or from a third-party holdings provider where one has them. Each holding is then screened as above.

Currencies

Figures reported in other currencies are converted at European Central Bank reference rates, so both sides of every ratio are in the same currency. If no rate is available, the figures are withheld rather than converted at an old rate.

Most verdicts are straightforward. These are the cases where the rule needs care, and how we handle each one.

Finance income as an upper bound on interest income

Many IFRS reports, including most UK ones, don’t show interest income on its own. They show total finance income, which includes interest along with items such as dividends and currency gains. Interest income can’t be larger than the total, so a total below the 5% limit proves interest income is below it too. A total at or above the limit can’t fail a company, because the interest inside it may be small. When we use this bound, the stock’s page says so, and purification is worked out on the bound, which can only overstate it.

Example: a UK company reports finance income of 2% of revenue. Its interest income can’t be more than that, so it is under 5% and the test passes. If finance income were 8% of revenue, it would prove nothing either way, and the test would stay open.

Interest reported together with other income

We use a line that is interest income alone whenever the company files one. If it only files a combined line, we test the combined figure. That can overstate interest income, never understate it.

Example: a company reports “interest and dividend income” as one line. We test the whole line against the 5% limit.

Zero debt, proven from a US balance sheet

A company with no borrowings has nothing to file under a debt heading, so a missing debt figure on its own proves nothing. SEC rules require borrowings to be shown as separate lines on the balance sheet. So when every liability line on the filed balance sheet adds up to the filed totals and none of them is a borrowing, the company has no borrowings. That is a filed fact, not an estimate. Any interest- bearing liability, such as a bank’s deposits, blocks the proof.

The same balance sheet also catches debt filed under a company’s own label. Deere, for example, files its long-term borrowings under a company-specific tag that the standard SEC data omits. Where the printed balance sheet shows more debt than the standard data, we use the larger figure.

Example: a company’s liabilities are trade payables, accrued expenses and deferred revenue, and they add up exactly to its total liabilities. There is no borrowing line, so its debt is zero.

Zero debt, proven from a UK annual report

UK annual reports must tag every figure on the main financial statements. When every tagged liability is a recognised non-borrowing item, there is no borrowing-like item at all, and the lines add up to the filed totals, the company has no interest-bearing debt. If anything doesn’t add up, or a line could hide a loan, there is no proof and the test stays open.

Example: a UK company’s liabilities are trade payables, lease liabilities, tax and provisions, and they add up exactly to its current and non-current totals. Its debt is zero.

Zero finance income, proven from a UK income statement

Interest revenue must be shown as its own line on an IFRS income statement. If a UK report tags no finance, interest or investment income at all, and profit before tax equals operating profit minus finance costs (plus any share of joint ventures shown below operating profit), there is no room for any. Interest income is then proven to be zero.

Example: operating profit is £100m, finance costs are £10m and profit before tax is £90m. Nothing is left over for finance income, so it is zero.

Interest income not disclosed: Questionable

Some companies don’t disclose their interest income, or have stopped disclosing it. If every other test passes, the verdict is Questionable, and it is never certified. We don’t fill the gap with an estimate, or assume the figure is too small to matter: the standard gives no basis for either, and a Shariah verdict should rest on verifiable information.

Example: Apple’s earlier annual reports showed its interest and dividend income in a note. Its 2025 annual report removed that note, so the figure appears nowhere in the filing.

Market capitalisation is always the denominator

The debt and cash tests divide by market capitalisation, as the standard says. We never substitute book equity, even when market capitalisation is missing: without it those tests stay open. We use the latest market value, not an average over the year.

Example: a company that has bought back many of its own shares can have negative book equity. Dividing its debt by that would give a negative ratio, which would look like a pass.

When figures disagree, the cautious one wins

Companies tag the same figure in different ways. Where several filed figures could each represent total debt, we use the largest, because understating debt is the direction that could certify a failing company. We never take the current portion of debt alone as the total.

Example: one filed tag gives long-term debt of $26bn and another, more complete one gives $31bn. We use $31bn.

Every stock shows exactly one of these.

Questionable, Under review and Can’t verify are not verdicts either way. A stock we can’t screen hasn’t failed screening, and it hasn’t passed.

Purification

A compliant company can still earn a little interest. The purification ratio is the share of its revenue that came from interest: interest income divided by revenue, from the same twelve-month figures as the 5% test. The amount to give away is the dividend you received multiplied by that ratio. Where the test passed on the finance-income upper bound, the ratio uses the bound, so it can only overstate what is due.

Zakat

Zakat is an estimate, and the calculator shows the assumptions it used. You choose the method:

• Active (resale intent): 2.5% of the full market value of your holdings.
• Long-term (dividend intent): 2.5% of the zakatable part of each holding. That part is the company’s cash, short-term interest-bearing investments and receivables as a share of its market capitalisation, between 0% and 100%, applied to the value of your holding.

If we don’t have the company figures for the long-term method, that holding is counted at its full market value and marked as an estimate, so zakat is not understated. A holding with no live price is valued at what you paid for it, and marked the same way.

Zakat is due only if your zakatable wealth reaches the nisab. By default this is the value of 595 grams of silver, the lower and more cautious threshold; you can choose 85 grams of gold instead. Both are priced from current metal prices. The 2.5% rate is for a lunar year.

A fund’s verdict is built from the verdicts of the companies it holds, weighted by how much of the fund each one is.

• We screen the largest holdings first, until they cover 90% of the fund or we reach 25 holdings. The page shows how much of the fund was screened, and percentages are of the screened part.
• At least 95% compliant by weight: the fund is compliant. From 50% to just under 95%: mixed. Below 50%: not compliant.
• Holdings without a definite verdict, and holdings we can’t match to a company, count as not compliant. If they make up more than 10% of the screened weight and could change the result, the fund gets no verdict rather than a guess.
• The fund’s purification figure is the weighted average of its holdings’ purification ratios. A holding without a figure adds nothing to it, so treat it as a minimum.

• Every hour, a rolling job screens a batch of companies: first those with no verdict yet, then the oldest verdicts. A verdict less than a day old is left alone.
• Every day, before the US market opens, every stock held in a portfolio or on a watchlist is screened again. If a stock you hold is downgraded on fresh data, we can let you know by email.
• Every week, we load the latest SEC balance-sheet data sets, and we check UK companies for a new annual report.
• SEC filings are re-read at most once a day, and UK Total Voting Rights notices about twice a day, whenever the company is screened.
• Opening a stock’s page screens it again on current data.

• London share prices aren’t shown yet. They are used in the background to work out market capitalisation for UK verdicts.
• Companies whose filings aren’t in our sources show Under review until we add their market. That includes companies outside the US and Europe that don’t file with the SEC, and European companies whose reports filings.xbrl.org doesn’t yet collect (Germany and Ireland, for example).
• Fund screening covers US-registered funds that file with the SEC.
• We don’t yet measure small amounts of prohibited revenue inside an otherwise permissible business. That needs revenue broken down by business segment, so today the 5% test is applied to interest income, and prohibited core businesses are caught by the business-activity screen.
• We don’t connect to brokerage accounts. Portfolio holdings are entered by you.