Beyond ESG: Embedding Maqasid al-Shariah into Sustainable Finance through Shariah Enterprise Theory
(1) Jember University
(2) Jember University
(3) Jember University
(4) Jember University
(*) Corresponding Author
Abstract
Sustainable finance has increasingly integrated environmental, social, and governance (ESG) principles into capital allocation and corporate accountability. Yet mainstream ESG remains largely anthropocentric and instrumental, with emphasis on market legitimacy, stakeholder expectations, and governance incentives. These foundations do not fully capture the transcendental and ethical commitments that shape Islamic finance.
This conceptual paper employs an integrative conceptual review and framework-synthesis approach to connect Shariah Enterprise Theory (SET), maqasid al-shariah, and sustainable finance. The synthesis compares the assumptions of mainstream sustainability theories with SET, maps SET's spiritual, social, and environmental accountabilities onto contemporary Islamic finance instruments, and deductively develops propositions for future empirical testing. SET frames accountability as responsibility to Allah, human beings, and nature, while maqasid al-shariah provides the purpose logic through the preservation of religion, life, intellect, lineage, and wealth.
The resulting Islamic Sustainable Finance (ISF) framework shows how green sukuk, Islamic social finance, waqf-based investment, and sustainability reporting can move beyond formal Shariah compliance and ESG labeling toward verified social and environmental additionality. The paper contributes theoretically by specifying the accountability mechanisms through which SET extends ESG; managerially by translating SET into observable governance, allocation, and impact practices; and policy-wise by proposing actionable integration of maqasid-oriented indicators into sustainable-finance assessment. The paper concludes that SET can position Islamic finance as a distinctive, purpose-driven contributor to sustainable development while avoiding the reduction of spiritual accountability to symbolic compliance.Keywords
References
Ahmed, H., Mohieldin, M., Verbeek, J., & Aboulmagd, F. W. (2015). On the sustainable development goals and the role of Islamic finance. World Bank Policy Research Working Paper No. 7266. https://doi.org/10.1596/1813-9450-7266
Anwar, D., Wahab, A., & Waris, W. (2025). Maqasid syariah and sustainable development: Integrating Islamic objectives into economic planning. Formosa Journal of Multidisciplinary Research, 4(6). https://doi.org/10.55927/fjmr.v4i6.269
BIS. (2020). Digital financial services and financial inclusion. Bank for International Settlements.
Bolla, M., Jahan, M., Chaudhary, N., Kumar, M., Karichalil, R. A., & Chek, M. Z. A. (2025). The impact of ESG performance on corporate financial returns: A global perspective. International Journal of Environmental Sciences, 11(12s), 228–237. https://doi.org/10.64252/8a9a4q28
Chapra, M. U. (2008). The Islamic vision of development in the light of Maqasid al-Shari’ah. Islamic Research and Training Institute (IRTI), Islamic Development Bank.
Daida, S. (2024). Green finance and ESG investing: Aligning profit with sustainability. European Economic Letters, 15(2), 3918–3924. https://doi.org/10.52783/eel.v15i2.3229
Dusuki, A. W., & Bouheraoua, S. (2011). The framework of Maqasid al-Shari’ah and its implications for Islamic finance. IRTI Working Paper Series, No. 1432-7.
Eccles, R. G., & Klimenko, S. (2019). The investor revolution: Shareholders lead on sustainability. Harvard Business Review, 97(3), 106–116.
Eccles, R. G., Ioannou, I., & Serafeim, G. (2014). The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), 2835–2857. https://doi.org/10.1287/mnsc.2014.1984
Eccles, R. G., Krzus, M. P., & Ribot, S. (2021). The future of sustainability reporting standards. Journal of Applied Corporate Finance, 33(2), 34–45. https://doi.org/10.1111/jacf.12441
Ejaz, M., Ashraf, M., Shahid, S., & Kamran, M. (2025). Impact of green finance and ESG on the sustainable performance of Islamic banks. Sustainable Business and Society in Emerging Economies, 7(2). https://doi.org/10.26710/sbsee.v7i2.3353
European Commission. (2020). Sustainable finance disclosure regulation (SFDR). Brussels: European Union.
Fahmi, R. A. (2025). Islamic social finance and environmental sustainability: A critical review of policy and practice. Iqtishodiah: Jurnal Ekonomi dan Perbankan Syariah, 7(1). https://doi.org/10.62490/iqtishodiah.v7i1.1103
FAO. (2018). Financing sustainable agriculture and food systems. Food and Agriculture Organization of the United Nations.
Freeman, R. E. (1984). Strategic management: A stakeholder approach. Boston: Pitman.
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210–233. https://doi.org/10.1080/20430795.2015.1118917
Global Reporting Initiative (GRI). (2020). GRI Standards. Amsterdam: Global Sustainability Standards Board.
Global Sustainable Investment Alliance (GSIA). (2020). Global sustainable investment review 2020.
Gompers, P. A., Ishii, J., & Metrick, A. (2003). Corporate governance and equity prices. Quarterly Journal of Economics, 118(1), 107–155. https://doi.org/10.1162/00335530360535162
Gupta, T. (2025). Sustainable finance as a new financial model. International Journal of Scientific Research in Engineering and Management. https://doi.org/10.55041/ijsrem50300
Hai, A., Kassim, S., & Mohtesham, M. M. J. (2022). An innovative sukuk-waqf for Islamic microfinance institutions: Integrating maqasid al-shariah, SDGs and waqf. Tazkia Islamic Finance and Business Review, 15(1), 1–22. https://doi.org/10.30993/tifbr.v15i1.251
Harahap, B., Risfandy, T., & Futri, I. N. (2023). Islamic law, Islamic finance, and sustainable development goals: A systematic literature review. Sustainability, 15(8), 6626. https://doi.org/10.3390/su15086626
Hasan, M. K. (2002). Worldview orientation and ethics: A Muslim perspective. In A. M. Sadeq & K. Ahmad (Eds.), Ethics in business and management: Islamic and mainstream approaches. London: Asean Academic Press.
Iqbal, Z., & Mirakhor, A. (2004). Stakeholders model of governance in Islamic economic system. Islamic Economic Studies, 11(2), 43–63.
Jaakkola, E. (2020). Designing conceptual articles: Four approaches. AMS Review, 10, 18–26. https://doi.org/10.1007/s13162-020-00161-0
Indriani, E. (2024). Sustainable investing driven by ESG performance. International Journal of Research in Business and Social Science, 13(3), 385–399. https://doi.org/10.20525/ijrbs.v13i3.3287
Juthi, S., Kamrujjaman, M., Mistry, A. M., & Alauddin, M. (2024). Sustainable finance and data analytics: A systematic review of ESG data in investment decisions. Academic Journal on Business Administration, Innovation & Sustainability, 4(4), 70–88. https://doi.org/10.69593/ajbais.v4i04.130
Li, L., Suhrab, M., Radulescu, M., & Banuta, M. (2025). Moving toward sustainable finance: Leveraging ESG performance and risk management to drive corporate financing efficiency. Engineering Economics, 36(1), 1–15. https://doi.org/10.5755/j01.ee.36.1.36361
Mohamad, N. (2023). A bibliometric review of sustainable and responsible investment sukuk envision green financing. European Proceedings of Finance and Economics. https://doi.org/10.15405/epfe.23081.32
Morningstar. (2021). Global sustainable fund flows report. Morningstar Research.
Nasution, A., Harahap, D., & Uula, M. M. (2023). Environmental, social, governance (ESG) and Islamic finance: A review. Management and Sustainability, 1(1). https://doi.org/10.58968/ms.v1i1.285
Otoritas Jasa Keuangan (OJK). (2026). Taksonomi untuk Keuangan Berkelanjutan Indonesia (TKBI) Versi 3. Jakarta: Otoritas Jasa Keuangan.
OECD. (2020). Sustainable finance and investment policies: A global overview. Paris: OECD Publishing.
Putri, I. L., Sulistiyo, A. B., Widiyanti, N. W., & Miqdad, M. (2025). Systematic literature review on the integration of maqashid al-shariah and ESG principles in Islamic financial institutions. International Journal of Research and Review. https://doi.org/10.52403/ijrr.20250861
Rahmiyati, N. (2025). ESG factors, corporate governance, and financial performance: Exploring their impact on sustainability reporting and investment decisions. Journal of Hunan University Natural Sciences, 52(7), 1–12
Shalhoob, H. (2025). ESG disclosure and financial performance: Survey evidence from accounting and Islamic finance. Sustainability, 17(4), 1582. https://doi.org/10.3390/su17041582
Suchman, M. C. (1995). Managing legitimacy: Strategic and institutional approaches. Academy of Management Review, 20(3), 571–610. https://doi.org/10.2307/258788
Sullivan, R., & Mackenzie, C. (2017). Responsible investment: Guide to ESG data providers and relevant trends. Journal of Applied Corporate Finance, 29(2), 8–15. https://doi.org/10.1111/jacf.12211
Triyuwono, I. (2006). Perspektif, metodologi, dan teori akuntansi syariah. Jakarta: Rajawali Pers.
Triyuwono, I. (2011). Shariah accounting: Theoretical framework and practical application. Journal of Islamic Accounting and Business Research, 2(1), 1–20. https://doi.org/10.1108/17590811111129514
Triyuwono, I. (2012). Akuntansi syariah: Perspektif, metodologi, dan teori. Yogyakarta: BPFE.
UNCTAD. (2021). World investment report 2021: Investing in sustainable recovery. Geneva: United Nations Conference on Trade and Development.
UNEP FI. (2016). Principles for responsible banking. United Nations Environment Programme Finance Initiative.
UNEP FI. (2019). Changing course: A comprehensive investor guide to scenario-based methods for climate risk assessment. United Nations Environment Programme Finance Initiative.
Warokka, A., Woo, J. K., & Aqmar, A. Z. (2025). Herding behavior, ESG disclosure, and financial performance: Rethinking sustainability reporting to address climate-related risks in ASEAN firms. Journal of Risk and Financial Management, 18(8), 457. https://doi.org/10.3390/jrfm18080457
World Bank. (2021). World development report 2021: Data for better lives. Washington, DC: World Bank.
Yunus, Y. A., & Nanda, S. (2024). Exploring sustainable finance: A qualitative inquiry into responsible investment and ESG risk evaluation. Golden Ratio of Finance Management, 4(1), 1–15. https://doi.org/10.52970/grfm.v4i1.429
Zhang, R. (2025). Green finance and ESG investment strategies under climate risk management. Economics and Management Innovation. https://doi.org/10.71222/00d71j98
DOI: http://dx.doi.org/10.33019/ijbe.v10i3.1354
Article Metrics
Abstract view : 0 timesRefbacks
- There are currently no refbacks.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Integrated Journal of Business and Economics is licensed under a Creative Commons Attribution 4.0 International License.
