ESG REPORTING PRACTICES AMONG ISLAMIC BANKS: A GLOBAL PERSPECTIVE

Abstract

Environmental, Social, and Governance (ESG) or sustainability reporting have considerably increased in the last decades. The year 2020 marks a turning point in the United Nations' (UN) 2030 Agenda. The Sustainable Development Goals (SDGs) have created new expectations and gained support among corporate actors who rely on well-informed, timely, and strategically positioned markets. In recent years, research in sustainability practices has expanded globally. However, the banking industry received less attention from the academics since banks are generally not considered the main contributor to sustainability problems. Contrary to this, ESG and Islamic finance are under increasing academic attention, with the latter predicted to be more sensitive to sustainability due to its founding principles. Currently, the global Islamic asset under management (AUM) has increased by 2.3 times in the last decade to reach US$140 billion by the end of 2020. Using the library-based research methodology, this research aims to provide a comprehensive overview of ESG reporting in Islamic banks from a global perspective. Based on this analysis, it is argued that Islamic banks lack sufficient investment in ESG-friendly initiatives. A brief discussion on the classification of ESG components and analysis of key frameworks and guidelines are provided to understand the regulatory framework that governs ESG practices. The article concludes with a recommendation for the necessary actions that can be adopted to enhance ESG practices in Islamic banks to ensure that they remain relevant and competitive with conventional banks.