Sustainable governance in islamic finance: the role of green economy in shaping Malaysia, Brunei Darussalam, and Indonesia’s banking systems

Abstract

This study explores the integration of Sustainable Governance (SG), Corporate Social Responsibility (CSR), and Maqasid Shariah within Islamic banking practices in Malaysia, Indonesia, and Brunei Darussalam. By examining each nation’s approach to aligning financial practices with Environmental, Social, and Governance (ESG) principles, the paper highlights the role of Islamic banks in promoting sustainability. In Malaysia, the Value-Based Intermediation (VBI) framework integrates CSR into Islamic banking, advancing community welfare and sustainable development. Indonesia’s innovative Green Sukuk positions it as a leader in green Islamic finance, channeling funds towards environmentally-friendly projects. Brunei, though in the nascent stages of CSR adoption, shows potential in ethical investments aligned with Maqasid Shariah. Across these nations, Maqasid Shariah principles guide Islamic banking in balancing profitability with social justice and environmental stewardship. The integration of CSR within Islamic finance underscores each country’s commitment to sustainable development, positioning Islamic banking as a crucial player in global sustainability efforts.