The S&P 500 Ethical Screen — The Full Results
Data as of May 2025. Screening based on MSCI Islamic Index Series methodology (May 2025 edition) as the reference framework. Financial figures approximate, sourced from publicly available FY2024 annual reports and index data. Educational content only.
I. What This Analysis Does
The S&P 500 contains 503 constituent securities representing approximately 80% of US equity market capitalisation. Applying ethical screening criteria to this universe produces a concrete picture of what compliant investing in the US large-cap space actually looks like — which companies pass, which fail, and why.
This analysis uses the MSCI Islamic Index Series methodology as the reference framework, using total assets as the denominator for financial ratio screens. This is the most widely used institutional framework for Islamic equity screening and produces the most conservative results among the major methodologies. Where a company would produce a different result under S&P Sharia or DJIM criteria (which use market capitalisation as the denominator), this is noted.
The five core screens applied are:
- Business activity screen: Exclude companies whose primary business involves conventional financial services, alcohol, tobacco, gambling, weapons manufacturing, pork-related products, adult entertainment, music production, hotel operations, or cinema. Threshold: more than 5% of total income from prohibited activities triggers exclusion.
- Debt screen: Total interest-bearing debt must be less than 33.33% of total assets.
- Cash and interest-bearing securities screen: Cash plus interest-bearing securities must be less than 33.33% of total assets.
- Accounts receivable screen: Accounts receivable plus cash must be less than 70% of total assets.
- Revenue purity screen: Interest income and other non-compliant revenue must be less than 5% of total income (cumulative).
The analysis is based on publicly available FY2024 annual report data and sector classification data as of early 2025. Individual company ratios are approximate; the purpose is to illustrate the screening outcome at the index level, not to provide definitive compliance assessments for individual securities.
II. Top-Line Results
Applying the five screens to the S&P 500 universe produces the following approximate results:
| Screen | Approximate Exclusions | % of S&P 500 by Count | Primary Sectors Affected |
|---|---|---|---|
| Business activity (primary) | ~75–85 companies | ~15–17% | Financials, Consumer Staples (alcohol/tobacco), Consumer Discretionary (gambling) |
| Debt screen (>33.33% debt/assets) | ~120–140 additional companies | ~24–28% | Utilities, Real Estate, Industrials (capital-intensive), Consumer Discretionary |
| Cash + securities screen (>33.33% cash/assets) | ~30–45 additional companies | ~6–9% | Technology (large-cap cash-rich), Healthcare (pharma with large cash reserves) |
| Accounts receivable screen (>70% AR+cash/assets) | ~15–25 additional companies | ~3–5% | Financial services, certain professional services |
| Revenue purity (>5% non-compliant income) | ~10–20 additional companies | ~2–4% | Diversified companies with significant interest income |
| Total estimated exclusions | ~250–310 companies | ~50–62% | — |
| Estimated compliant universe | ~190–250 companies | ~38–50% | Technology, Healthcare, Materials, selective Industrials and Consumer |
The headline finding is that approximately half the S&P 500 by company count passes the MSCI Islamic screening criteria. By market capitalisation, the picture is somewhat different: the compliant universe includes many of the largest companies by market cap (Apple under most methodologies, Microsoft, Nvidia, Amazon's core e-commerce operations), which means the compliant share of the index by market cap is broadly similar to the compliant share by company count.
The most significant exclusion category is the debt screen. This is not primarily a moral exclusion — it is a balance sheet quality filter. Companies failing the debt screen have interest-bearing debt exceeding one-third of their total assets. This includes the entire Utilities sector (where debt ratios of 50–60% of assets are standard), most of the Real Estate sector (REITs are structurally leveraged), and a significant portion of capital-intensive Industrials.
III. Failures by Screen Type
Business Activity Failures
The business activity screen produces the most straightforward exclusions. These are companies whose primary business is categorically incompatible with the screening criteria, regardless of their financial ratios.
The Financials sector accounts for the largest single category of business activity exclusions. All commercial banks (JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, US Bancorp), investment banks (Goldman Sachs, Morgan Stanley), insurance companies (Berkshire Hathaway's insurance operations, MetLife, Prudential, Aflac), and diversified financial services companies are excluded at the business activity screen. The sector represents approximately 13% of the S&P 500 by market cap. The exclusion is categorical — it is not a matter of degree or ratio calculation.
Within the Financials sector, a small number of companies present genuine grey areas. Visa and Mastercard are payment processors rather than lenders — they facilitate transactions but do not extend credit at interest. Most methodologies include them; conservative interpretations may not. MSCI and Intercontinental Exchange are financial data and exchange infrastructure businesses whose primary revenue comes from data licensing and exchange fees rather than financial intermediation. These are genuine exceptions within the Financials sector and should be assessed individually.
The Consumer Staples sector contributes a smaller but clear set of business activity exclusions. Alcohol producers — Brown-Forman (Jack Daniel's, Woodford Reserve) and Molson Coors — are excluded. Tobacco companies — Philip Morris International, Altria — are excluded. These are straightforward primary business exclusions.
The Consumer Discretionary sector contributes gambling-related exclusions. MGM Resorts, Caesars Entertainment, and Las Vegas Sands are casino operators excluded at the business activity screen. DraftKings and Flutter Entertainment (FanDuel's parent) are online sports betting operators, also excluded.
The Industrials sector contributes defence prime contractor exclusions. Raytheon Technologies (now RTX), Northrop Grumman, Lockheed Martin, L3Harris Technologies, and General Dynamics are weapons and defence systems manufacturers excluded under the defence/weapons business activity screen. Boeing is a more complex case: civil aviation manufacturing is compliant, but Boeing's defence revenue is significant. A revenue purity calculation is required; Boeing is borderline under the 5% threshold given the scale of its defence operations.
Debt Screen Failures
The debt screen — total interest-bearing debt less than 33.33% of total assets — is the most numerically significant filter after the business activity screen. It excludes companies across multiple sectors where capital-intensive business models require substantial debt financing.
The Utilities sector fails the debt screen as a category. Regulated utilities (electricity, gas, water distribution) are among the most capital-intensive businesses in the index. Debt ratios of 50–65% of total assets are standard. NextEra Energy, Duke Energy, Southern Company, Dominion Energy, American Electric Power, and Exelon all fail the debt screen by a significant margin. The business activity of electricity and water distribution is entirely compliant; the exclusion is purely structural, driven by the capital requirements of regulated infrastructure.
The Real Estate sector fails the debt screen almost categorically. REITs are structurally required to distribute 90% or more of taxable income as dividends, which necessitates debt financing for growth and maintenance. Debt ratios of 40–60% of total assets are typical. American Tower, Prologis, Crown Castle, Equinix, Public Storage, and Simon Property Group all fail the debt screen. The underlying business activity — rental of physical property and infrastructure — is compliant; the exclusion is driven by the REIT capital structure.
Within Industrials, capital-intensive businesses in aerospace, rail, and heavy equipment carry elevated debt ratios. Boeing (already noted for defence revenue) also carries significant debt from its commercial aircraft development programmes. Norfolk Southern and Union Pacific (rail infrastructure) carry debt ratios that may fail the screen. General Electric (now GE Aerospace) has historically carried significant debt from its former financial services operations.
Within Consumer Discretionary, automotive manufacturers and their financing subsidiaries present debt screen challenges. Ford Motor and General Motors both have large captive finance subsidiaries (Ford Motor Credit, GM Financial) whose debt is consolidated onto the parent balance sheet. This inflates the debt-to-assets ratio significantly. Marriott International and Hilton Worldwide carry elevated debt from property acquisition and franchise development.
Cash and Interest-Bearing Securities Screen Failures
The cash-and-securities screen — cash plus interest-bearing securities less than 33.33% of total assets — is the screen most distinctive to the MSCI total-assets methodology. It captures companies that hold large proportions of their assets in interest-bearing instruments, regardless of whether those instruments are debt or equity on the company's own balance sheet.
This screen disproportionately affects large-cap technology companies with significant cash reserves. Apple (as demonstrated in the Article 1 worked example) fails this screen: its $156.7 billion in cash and marketable securities represents approximately 42.9% of its $364.98 billion in total assets. Alphabet (Google's parent) holds approximately $100 billion in cash and short-term investments against total assets of approximately $430 billion — a ratio of approximately 23%, which passes the screen. Meta Platforms holds approximately $70 billion in cash and investments against total assets of approximately $230 billion — approximately 30%, near the entry buffer threshold.
Within Healthcare, large pharmaceutical companies with significant cash reserves may approach or breach this threshold. Johnson & Johnson, Pfizer, and AbbVie all hold substantial cash positions; their ratios should be verified against current balance sheet data.
Revenue Purity Screen Failures
The revenue purity screen — interest income and other non-compliant revenue less than 5% of total income — catches companies that pass the business activity screen but generate meaningful non-compliant income. This is a relatively small category in the S&P 500 context, as most companies with significant interest income are already excluded by the cash-and-securities screen.
The most common revenue purity issue is interest income from large cash holdings. For most companies, this represents well under 1% of total revenue and does not trigger the 5% threshold. The cases where it becomes relevant are companies with unusually high cash-to-revenue ratios — typically mature technology companies or companies in capital-light businesses that have accumulated cash faster than they can deploy it.
IV. Sector Compliance League Table
| Sector | Approx. Compliant Share by Count | Primary Exclusion Reason | Compliant Sub-Sectors |
|---|---|---|---|
| Information Technology | ~60–70% | Cash/securities screen (large-cap cash-rich) | Semiconductors, enterprise software, IT services |
| Health Care | ~65–75% | Debt screen (some pharma), cash screen | Medical devices, pharma (mid-cap), biotech (profitable) |
| Consumer Discretionary | ~45–55% | Business activity (gambling), debt screen (auto finance) | Autos (manufacturing), luxury goods, e-commerce |
| Consumer Staples | ~50–60% | Business activity (alcohol, tobacco) | FMCG (non-alcohol/tobacco), food manufacturing |
| Industrials | ~40–55% | Business activity (defence primes), debt screen | Industrial automation, logistics, construction |
| Materials | ~65–75% | Debt screen (capital-intensive mining) | Mining (low-debt), industrial chemicals, steel |
| Communication Services | ~40–55% | Business activity (gambling/media), debt screen (telecoms) | Digital advertising, streaming, pure digital platforms |
| Energy | ~35–50% | Debt screen (capital-intensive upstream) | Integrated majors with lower debt, midstream |
| Financials | ~3–5% | Business activity (categorical exclusion) | Exchanges/data providers (case by case) |
| Real Estate | ~5–10% | Debt screen (REIT structural leverage) | Non-REIT property companies (very few in S&P 500) |
| Utilities | ~0–5% | Debt screen (structural, entire sector) | Pure-play renewable developers (very few) |
V. Top 50 Compliant Companies by Estimated Market Capitalisation
The following table presents the approximate top 50 companies in the S&P 500 that are broadly expected to pass MSCI Islamic screening criteria, ranked by approximate market capitalisation as of early 2025. This list is illustrative and approximate — compliance status should be verified against current annual report data and the applicable methodology. Companies marked with an asterisk (*) have nuanced compliance positions discussed below.
| Rank | Company | Ticker | Sector | Approx. Market Cap (early 2025) | Key Compliance Note |
|---|---|---|---|---|---|
| 1 | Nvidia | NVDA | Information Technology | ~$3.0T | Passes all screens; low debt, semiconductors |
| 2 | Microsoft | MSFT | Information Technology | ~$3.0T | Passes; interest income ~1.8% of revenue |
| 3 | Amazon * | AMZN | Consumer Discretionary | ~$2.3T | E-commerce and AWS compliant; AWS interest income nuance |
| 4 | Alphabet * | GOOGL | Communication Services | ~$2.1T | Advertising-dominant; cash ~23% of assets — passes |
| 5 | Meta Platforms * | META | Communication Services | ~$1.5T | Advertising-dominant; cash near entry buffer |
| 6 | Tesla * | TSLA | Consumer Discretionary | ~$1.1T | EV manufacturing compliant; interest income ~1.8% of revenue |
| 7 | Eli Lilly | LLY | Health Care | ~$750B | Pharma; low debt relative to assets; passes |
| 8 | TSMC (ADR) | TSM | Information Technology | ~$700B | Semiconductor manufacturing; low debt |
| 9 | Broadcom | AVGO | Information Technology | ~$650B | Semiconductors; check debt post-VMware acquisition |
| 10 | Novo Nordisk (ADR) | NVO | Health Care | ~$500B | Pharma; strong cash generation, low debt |
| 11 | Walmart | WMT | Consumer Staples | ~$700B | Retail; check debt ratios (elevated but manageable) |
| 12 | UnitedHealth Group * | UNH | Health Care | ~$450B | Managed care / insurance — business activity nuance |
| 13 | Johnson & Johnson | JNJ | Health Care | ~$380B | Pharma/medtech; check cash screen |
| 14 | Exxon Mobil * | XOM | Energy | ~$500B | Integrated oil; check debt ratios |
| 15 | Procter & Gamble | PG | Consumer Staples | ~$380B | FMCG; no alcohol/tobacco; check debt |
| 16 | Costco | COST | Consumer Staples | ~$400B | Retail; low debt; passes screens |
| 17 | AbbVie | ABBV | Health Care | ~$320B | Pharma; check debt post-Allergan acquisition |
| 18 | Qualcomm | QCOM | Information Technology | ~$170B | Semiconductors; low debt; passes |
| 19 | Salesforce | CRM | Information Technology | ~$260B | Enterprise software; low debt; passes |
| 20 | Adobe | ADBE | Information Technology | ~$200B | Software; low debt; passes |
| 21 | Texas Instruments | TXN | Information Technology | ~$160B | Semiconductors; check debt |
| 22 | Caterpillar | CAT | Industrials | ~$180B | Heavy equipment; check debt (financial services subsidiary) |
| 23 | Linde | LIN | Materials | ~$220B | Industrial gases; low debt; passes |
| 24 | Medtronic | MDT | Health Care | ~$100B | Medical devices; check debt |
| 25 | Abbott Laboratories | ABT | Health Care | ~$200B | Medical devices/diagnostics; low debt; passes |
| 26 | Nike | NKE | Consumer Discretionary | ~$100B | Footwear/apparel; low debt; passes |
| 27 | Starbucks * | SBUX | Consumer Discretionary | ~$90B | Coffee retail; check debt ratios |
| 28 | Intuitive Surgical | ISRG | Health Care | ~$200B | Surgical robotics; low debt; passes |
| 29 | Booking Holdings * | BKNG | Consumer Discretionary | ~$160B | Travel platform; check debt |
| 30 | Pepsico | PEP | Consumer Staples | ~$200B | Beverages/snacks; no alcohol; check debt |
| 31 | Coca-Cola | KO | Consumer Staples | ~$260B | Non-alcoholic beverages; check debt |
| 32 | Danaher | DHR | Health Care | ~$160B | Life sciences tools; low debt; passes |
| 33 | Applied Materials | AMAT | Information Technology | ~$140B | Semiconductor equipment; low debt; passes |
| 34 | ASML (ADR) | ASML | Information Technology | ~$300B | Semiconductor lithography; low debt; passes |
| 35 | Lam Research | LRCX | Information Technology | ~$90B | Semiconductor equipment; low debt; passes |
| 36 | KLA Corporation | KLAC | Information Technology | ~$90B | Semiconductor equipment; check debt |
| 37 | Thermo Fisher Scientific | TMO | Health Care | ~$200B | Life sciences; check debt post-acquisitions |
| 38 | Colgate-Palmolive | CL | Consumer Staples | ~$60B | FMCG; no alcohol/tobacco; check debt |
| 39 | Air Products & Chemicals | APD | Materials | ~$60B | Industrial gases; check debt |
| 40 | Sherwin-Williams | SHW | Materials | ~$90B | Coatings/paints; check debt |
| 41 | Nucor | NUE | Materials | ~$30B | Steel manufacturing; low debt; passes |
| 42 | Motorola Solutions | MSI | Information Technology | ~$70B | Communications technology; check debt |
| 43 | Fortinet | FTNT | Information Technology | ~$60B | Cybersecurity; low debt; passes |
| 44 | Cadence Design Systems | CDNS | Information Technology | ~$80B | EDA software; low debt; passes |
| 45 | Synopsis | SNPS | Information Technology | ~$80B | EDA software; low debt; passes |
| 46 | Mondelez International | MDLZ | Consumer Staples | ~$80B | Snacks; no alcohol/tobacco; check debt |
| 47 | Parker Hannifin | PH | Industrials | ~$70B | Industrial motion/control; check debt |
| 48 | Amphenol | APH | Information Technology | ~$80B | Electronic connectors; low debt; passes |
| 49 | Mettler-Toledo | MTD | Health Care | ~$25B | Precision instruments; low debt; passes |
| 50 | Fastenal | FAST | Industrials | ~$40B | Industrial distribution; low debt; passes |
Market capitalisation figures are approximate as of early 2025. Compliance assessments are based on publicly available FY2024 data and are approximate. All figures should be verified against current annual reports before any investment decision.
VI. The Grey Areas: AAPL, GOOGL, AMZN, TSLA
The four largest non-financial companies in the S&P 500 by market capitalisation all present compliance nuances that are worth examining in detail. These are not clear pass or fail cases — they are companies where the screening outcome depends on which methodology you apply and how you interpret specific revenue categories.
Apple (AAPL)
Apple's compliance status is the most discussed grey area in Islamic equity screening. As demonstrated in the Article 1 worked example, Apple fails the MSCI cash-and-securities screen (42.9% of total assets) but passes the S&P Sharia and DJIM screens (approximately 5.2% of market cap). Apple is included in most major Islamic ETFs and indices, suggesting that fund managers using market-cap-denominated methodologies consider it compliant.
The revenue purity position is straightforward: Apple's interest income of approximately $3.7 billion represents approximately 0.95% of total revenue — well within the 5% threshold. Investors holding Apple should apply a purification calculation on dividends received, donating approximately 0.95% of dividends to charity. At Apple's current dividend yield of approximately 0.5%, this is a very small amount for most retail investors.
The practical conclusion: Apple is broadly considered compliant under market-cap-denominated methodologies (S&P Sharia, DJIM, AAOIFI) but fails under MSCI's total-assets methodology due to its large cash and securities holdings. Investors should apply the methodology they have chosen consistently.
Alphabet (GOOGL)
Alphabet's primary revenue is digital advertising — a compliant business activity. The company holds approximately $100 billion in cash and short-term investments against total assets of approximately $430 billion, producing a cash-to-assets ratio of approximately 23%. This passes the MSCI entry buffer threshold of 30%. Alphabet's debt is modest relative to its asset base.
The revenue purity question for Alphabet is more nuanced than for Apple. Alphabet's "Other Bets" segment includes various speculative ventures, and its investment portfolio generates interest and dividend income. The combined non-compliant revenue is estimated to be well below the 5% threshold, but investors should verify this against current annual report data.
Alphabet is broadly considered compliant under all major methodologies, subject to revenue purity verification. Purification on dividends applies, though Alphabet does not currently pay a dividend — capital gains purification is the relevant consideration for investors who sell shares.
Amazon (AMZN)
Amazon's compliance picture is complicated by the diversity of its business. Amazon Web Services (AWS) — cloud computing infrastructure — is a compliant business activity. Amazon's e-commerce marketplace is compliant. Amazon's advertising business is compliant. The primary compliance concern is Amazon's financial services activities: Amazon Pay, Amazon Lending (small business loans), and Buy Now Pay Later integrations. If these activities generate more than 5% of total revenue, they could trigger a business activity exclusion.
Based on publicly available data, Amazon's financial services revenue is estimated to be well below the 5% threshold relative to total net sales of approximately $590 billion in FY2024. However, the trend is worth monitoring as Amazon continues to expand its financial services offerings.
Amazon's debt position requires attention. The company carries significant long-term debt from its capital investment programme (data centres, logistics infrastructure). The debt-to-assets ratio should be verified against current balance sheet data; it has historically been near or above the 33.33% threshold under MSCI criteria.
Tesla (TSLA)
Tesla's primary business — electric vehicle manufacturing and energy storage — is compliant under all major methodologies. The company does not operate in any prohibited business category. Tesla's interest income of approximately $1.8 billion represents approximately 1.8% of total revenue of approximately $97.7 billion in FY2024 — within the 5% threshold.
Tesla's debt position is more favourable than many automotive manufacturers because it does not have a large captive finance subsidiary. Tesla Financial Services exists but is not the scale of Ford Motor Credit or GM Financial. The debt-to-assets ratio should be verified, but Tesla is broadly expected to pass the debt screen.
Tesla does not pay a dividend, so purification on dividends does not apply. Investors who realise capital gains on Tesla shares may wish to apply a proportional purification at the 1.8% non-compliant revenue rate, though this is not universally required across all methodological traditions.
VII. The Value Investing Alignment
A recurring observation among investors who apply ethical screening is that the resulting portfolio looks remarkably similar to a quality-focused value portfolio. This is not a coincidence — the screens are structurally aligned with classical investment principles.
The debt screen (debt less than 33.33% of total assets) is a direct balance sheet quality filter. Benjamin Graham's preference for companies where net current assets exceed long-term debt, and his general suspicion of highly leveraged businesses, points in the same direction. Warren Buffett's well-documented preference for businesses that generate cash rather than consume it, and his avoidance of companies with complex financial structures, is consistent with the debt and cash screens.
The business activity screen systematically excludes financial intermediaries — companies whose profits depend on the spread between borrowing and lending rates. These are precisely the companies that Warren Buffett has described as "toll bridges" in a pejorative sense when their business model depends on regulatory capture rather than genuine value creation. The screen also excludes tobacco, alcohol, and gambling — sectors that generate returns partly through addiction and habit formation rather than genuine consumer preference.
The revenue purity screen rewards companies with clear, focused business models. A company generating 4% of its revenue from interest income is a company that has accumulated cash faster than it can deploy it in its core business — potentially a sign of capital allocation inefficiency. The screen creates a mild incentive for companies to return cash to shareholders or invest it in productive assets rather than allowing it to accumulate in interest-bearing instruments.
The result is a screened universe that systematically overweights technology, healthcare, and materials — sectors characterised by asset-light business models, high margins, low debt, and genuine competitive advantages. It systematically underweights financials, utilities, and real estate — sectors characterised by leverage, regulatory dependency, and commodity-like returns. This is not a coincidence; it is a structural feature of the screening criteria that happens to align with quality-factor investing.
Non-Muslim investors who apply these screens as a pure investment discipline — without any religious motivation — will find that the resulting portfolio has historically outperformed the broad market on a risk-adjusted basis. This is not because ethical investing is inherently superior, but because the specific screens applied happen to select for business quality characteristics that are associated with long-term outperformance.
VIII. Limitations of This Analysis
Several important limitations apply to any sector-level or index-level screening analysis of this kind.
First, financial ratios change quarterly. A company that passes the debt screen in one period may fail it in the next if it completes an acquisition or draws down a credit facility. The compliance picture presented here is a snapshot based on FY2024 data and should be updated at each annual report cycle.
Second, revenue composition changes over time. Amazon's expansion into financial services, Apple's growth in the Services segment, and the ongoing diversification of large technology companies mean that revenue purity calculations require annual review. A company that passes the revenue purity screen today may not pass it in three years.
Third, this analysis uses MSCI criteria as the reference framework. Under S&P Sharia or DJIM criteria, the compliant universe would be larger — particularly for large-cap technology companies that fail the MSCI cash-and-securities screen but pass the market-cap-denominated screens. Investors should apply the methodology they have chosen consistently rather than cherry-picking between frameworks.
Fourth, sector classification is imperfect. GICS classifications are updated periodically, and some companies span multiple sectors. The compliance picture for a company classified in one sector may differ from what a bottom-up analysis of its actual revenue composition would suggest.
Disclaimer: Educational content only. Not religious advice. Not financial advice. Data approximate; verify with current sources before making investment decisions. Compliance assessments are based on publicly available FY2024 data and the MSCI Islamic Index Series methodology (May 2025 edition) as a reference framework. Individual company compliance should be verified against current annual reports and the applicable methodology document. ETF holdings and index compositions change; verify current holdings before any investment decision.
