ESG Disclosure and Financial Performance: Survey Evidence from Accounting and Islamic Finance

Abstract

This study examines the relationship between Environmental, Social, and Governance (ESG) disclosures and perceived financial performance within the context of Islamic finance, with a focus on Maqasid al-Shariah—the overarching goals of Islamic law. Using a quantitative approach, the study surveyed 350 stakeholders in Saudi Arabia’s Islamic finance sector, including corporate managers, investment professionals, and financial analysts, over a six-month period (May to October 2024). The findings indicate that stakeholders perceive a positive relationship between ESG disclosures and financial performance, particularly when companies align their ESG practices with Islamic finance principles. However, the study does not measure actual financial performance; rather, it assesses stakeholders’ perceptions of ESG’s influence on corporate governance, risk management, and investment attractiveness. Results suggest that companies integrating ESG principles with Maqasid al-Shariah foster greater stakeholder trust, enhance corporate responsibility, and promote long-term sustainability. However, variations in trust and investment decisions exist based on industry type, ESG disclosure levels, and demographic factors such as experience and familiarity with ESG practices. The study provides novel insights into how Islamic finance principles shape ESG disclosure practices, offering practical recommendations for improving corporate governance and sustainability. By emphasizing transparency, ethical investment, and regulatory alignment, these findings contribute to ongoing discussions on sustainable finance and the role of ESG in shaping Islamic financial institutions.