ESG and Islamic Finance: An Ethical Bridge Built on Shared Values

Abstract

Environmental, Social & Governance (ESG) is a trending topic worldwide which is gaining a lot of traction due to its focus on social and environmental impact, as well as its relation to improved financial performance. Similarly, Islamic Finance, which is Shariah compliant, is also another concept that is expanding globally. These two concepts have many shared values and commonalities as they both tackle social development challenges. Nevertheless, there are several barriers and challenges in terms of integrating ESG in financial institutions, as it is a new concept. Many Islamic banks have already began promoting sustainability through their financing and initiatives years ago which puts them ahead in terms of ESG. There are still many barriers that need to be tackled in order to gain the best outcome from ESG integration and Islamic Finance, however, going forward combining Islamic Finance with ESG can be the future for a positive impact.