Summary: ESG and Shari'ah Risks in Islamic Finance
Islamic teachings strongly align with ESG (Environmental, Social, and Governance) principles, emphasizing responsible resource use, social equity, and ethical governance. The Qur'an and Sunnah provide clear guidance on avoiding waste, ensuring fair wages, and promoting sustainability—core elements of ESG.
In the context of Islamic banking and finance, several ESG-related risks must be managed:
Environmental Considerations: Ensuring financing does not harm the environment, supporting renewable energy, and participating in green sukuk.
Social Responsibility: Financial inclusion, fair treatment of employees (timely wages, equitable benefits), and sustainable use of charity funds.
Governance & Ethical Practices: Aligning corporate strategy with ESG, educating senior management, and ensuring product inclusivity for all societal segments.
By integrating these principles, Islamic financial institutions can strengthen ethical operations, promote sustainable economic growth, and adhere to both ESG standards and Shari'ah guidelines.
ESG Audit - Shari'ah Framework (Objectives, Risks & Consideration) - Part 2
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