An extensive body of literature on CSR examined its effects on several business dimensions. However, little attention has been paid on the relationship between the growing role played by Islamic finance, its connection with sustainability and the drivers of such relationship. Based on a sample of 224 banks from sixteen emerging and advanced countries in the period 2014–2017, this paper assesses whether and to what extent the development of Islamic financial markets relates to banks’ sustainability strategies. We propose a novel perspective that includes the new Islamic Finance Development Indicator (IFDI), its components and how it relates to aggregate and individual ESG scores. Our results show a positive relationship between IFDI and ESG scores that mostly revolves around the social pillar. This finding strengthens the generally acknowledged link between Islamic finance and sensitivity to social implications, despite gains in sustainability are subject to non-linearity.
- islamic finance