I've always been uneasy about the arbitrary 5% limit on haram revenue for Sharia screening stocks, especially since this threshold has no grounding in the Quran or Sunnah.

Yet, I hesitated to challenge the existing 5% limit, as it appeared to be a reasonable approximation of what could be considered permissible.

I realized that a 0% limit on haram revenue wouldn't be practical, as it would essentially exclude Muslims from the investment arena altogether.
There simply are no companies that are perfect from a Sharia perspective. At the very least the company keeps its money in a bank which enables the bank to offer interest-bearing products. 

Lately, I've been immersing myself in the study of Zakat, the critical pillar of our faith designed to purify our wealth.

The concept of Zakat as a means of purifying wealth is explicitly mentioned in the Quran:

خُذْ مِنْ أَمْوَالِهِمْ صَدَقَةً تُطَهِّرُهُمْ وَتُزَكِّيهِم بِهَا وَصَلِّ عَلَيْهِمْ ۖ إِنَّ صَلَاتَكَ سَكَنٌ لَّهُمْ ۗ وَاللَّهُ سَمِيعٌ عَلِيمٌ

"Take, [O, Muhammad], from their wealth a charity by which you purify them and cause them increase, and invoke [Allah's blessings] upon them. Indeed, your invocations are reassurance for them. And Allah is Hearing and Knowing."

Surah At-Tawba (9:103)

There are bound to be some impurities that enter into a person’s income and the way to purify these impurities is through Zakat.

Wait a second, what is the percentage used for Zakat as taught to us by the prophet pbuh?

Oh that’s right, 2.5%

Specifying 2.5% as the Zakat requirement suggests that the Sharia is assuming you shouldn’t have any more than this that requires purification. In other words, while you strive to have all your dealings be halal, if you are off by 2.5% then this is a reasonable margin of error.

So, wouldn't it be logical to adopt this same 2.5% threshold as our criterion when screening stocks for Sharia compliance?

I think so.

Therefore, I’m changing the standard we use at PIF from 5% to 2.5%

At least now, the figure we're using is grounded in a well-founded rationale, rather than being a random number seemingly pulled out of thin air.

As always, Allah swt knows best.