GREEN ISLAMIC BANKING AND ESG INTEGRATION: DEVELOPING A MAQĀṣID AL-SHARĪ'AH SUSTAINABILITY PERFORMANCE INDEX
DOI:
https://doi.org/10.59623/7w13vf59Keywords:
Maqāṣid al-Sharī'ah, Islamic banking, ESG, green finance, sustainability performance index, Delphi method, AHP, OIC countriesAbstract
The global Islamic banking sector has experienced remarkable growth, yet it continues to operate without a standardised, theoretically grounded framework for evaluating sustainability performance that integrates both classical Islamic normative principles and contemporary Environmental, Social, and Governance (ESG) criteria. This study addresses that critical gap by designing and validating a Maqāṣid al-Sharī'ah Sustainability Performance Index (MSPI) a composite, multi-dimensional instrument anchored in the five objectives of Islamic law: preservation of faith (Hifz al-Dīn), life (Hifz al-Nafs), intellect (Hifz al-'Aql), progeny (Hifz al-Nasl), and wealth (Hifz al-Māl) each mapped systematically to corresponding ESG pillars. A mixed-methods design was employed, combining a two-round Delphi method with 25 international experts drawn from Islamic finance scholarship, ESG practice, and bank management, followed by Analytic Hierarchy Process (AHP) weighting and a pilot application across eight Islamic banks from six OIC member countries. Psychometric validation confirmed strong instrument reliability (overall Cronbach's α = 0.921) and construct validity (composite reliability = 0.941; AVE = 0.66). Pilot results reveal considerable variance in MSPI scores ranging from 0.642 to 0.768 primarily driven by deficiencies in the green finance and intergenerational equity dimensions (Hifz al-Nasl). The study contributes an operationalised index with 37 traceable indicators, a weighting methodology transparent to auditors and regulators, and a governance-aligned disclosure framework. Implications extend to Islamic banking regulators, Sharī'ah supervisory boards, green sukuk structuring, and the alignment of Islamic financial institutions with the United Nations Sustainable Development Goals.
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