Integration of Islamic Finance with ESG Sustainability Efforts Evidence in Malaysia

Nurul Afzan Najid, Amirul Afif Muhamat and Mohamad Nizam Jaafar
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Nurul Afzan Najid: Faculty of Accountancy,UiTM Cawangan Pahang Kampus Raub,Malaysia
Amirul Afif Muhamat: Faculty of Business and Management, Shah Alam, Malaysia
Mohamad Nizam Jaafar: Faculty of Arshad Ayub Graduate Business School, Universiti Teknologi MARA Shah Alam, Malaysia

International Journal of Research and Innovation in Social Science, 2024, vol. 8, issue 12, 204-215

Abstract: This paper studies the integration of Islamic banking into worldwide sustainability initiatives, which in turn underlines the special role of Islamic financial principles in the process of achieving environmental, social, and governance (ESG) goals. Islamic finance, which is built upon ethical principles such as the ban on interest (riba), uncertainty (gharar), and investments in harmful businesses (haram), by default, promotes the goals of sustainable finance. The research was based on qualitative approaches, mainly the grounded theory to examine the feedback from different people in the Islamic finance field. This technique helps in the determination of important themes, which are Principles and Ethics, Financial Products and Services, Sustainability and ESG, Global Integration and Education, and Challenges and Opportunities. The findings show that Islamic finance has a vast potential on global sustainability to be increased by the introduction of innovative financial instruments, for instance, Green Sukuk and Islamic microfinance. However, the obstacles which include the lack of standardization and the inadequate knowledge beyond the areas with a Muslim majorities keep on existing. The paper presents the methods to address the problem, such as the creation of better regulatory frameworks and the project of educational programs to encourage a more effective integration of Islamic finance with the global sustainability projects. This paper also aims to propose framework on the aligning Islamic finance and the global sustainability efforts. Future research should give the highest emphasis to the development of the quantitative methods for evaluating the influence of Islamic financial products on the sustainability outcomes. Besides, it should also check the effectiveness of the particular laws that are certain to increase the acceptance of the same phenomenon in the non-Muslim markets. The Islamic finance may overcome these problems and research these chances, thus, making its contribution to the global sustainability to increase, and also becoming an example for the ethical and socially conscious investing.

Date: 2024
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