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Does Environmental Disclosure and Corporate Governance Ensure the Financial Sustainability of Islamic Banks?

Author

Listed:
  • Saqib Muneer

    (Department of Economics and Finance, College of Business Administration, University of Ha’il, Ha’il 55476, Saudi Arabia)

  • Ajay Singh

    (Department of Management and Information Systems, College of Business Administration, University of Ha’il, Ha’il 55476, Saudi Arabia)

  • Mazhar Hussain Choudhary

    (Department of Economics and Finance, College of Business Administration, University of Ha’il, Ha’il 55476, Saudi Arabia)

  • Awwad Saad Alshammari

    (Department of Management and Information Systems, College of Business Administration, University of Ha’il, Ha’il 55476, Saudi Arabia)

  • Nasir Ali Butt

    (Department of English, Applied College, University of Ha’il, Ha’il 55476, Saudi Arabia)

Abstract

The purpose of this study is to investigate the influence of environmental disclosure and corporate governance on the financial performance of Islamic banks in Saudi Arabia. This study highlights that sustainable practices are transparent with financial objectives using the religious framework of Islamic finance. This research is based on Worldwide Vision 2030, which covers sustainable development and promotes environmental, social, and governance (ESG) principles, as well as corporate governance factors, such as board composition and Shariah Supervisory Boards (SSBs). We use a hybrid approach for our findings, with a dataset spanning 2011–2023 for the quantitative analysis and 20 semi-structured analyses conducted for a qualitative approach that aligns with objectives. We found that environmental disclosure boosts profits and stakeholder trust. Corporate governance structures, such as environmental boards and sustainability committees, improve the environmental disclosure of financial performance in Islamic banks. In this positive interaction, specialized governance drives Sharia-compliant sustainability initiatives. SSBs help Islamic banks integrate sustainability and meet religious and ESG environmental standards. Board diversity and dedication in the sustainability committee both play important roles in enhancing environmental disclosure practices; in return, these improved financial performances. The interaction of environmental disclosure and board environmental expertise has a positive impact on the overall performance, which indicates that governance structure supports sustainability-related decision-making, aligning with transparency. This study suggests that Islamic banks standardize ESG frameworks, improve board environmental expertise, and invest in real-time sustainability reporting digital solutions. Saudi Islamic banks can lead regional and global sustainable banking by adopting these strategies to align with global sustainability trends, improve financial performance, and meet ethical finance expectations.

Suggested Citation

  • Saqib Muneer & Ajay Singh & Mazhar Hussain Choudhary & Awwad Saad Alshammari & Nasir Ali Butt, 2025. "Does Environmental Disclosure and Corporate Governance Ensure the Financial Sustainability of Islamic Banks?," Administrative Sciences, MDPI, vol. 15(2), pages 1-25, February.
    • Handle: RePEc:gam:jadmsc:v:15:y:2025:i:2:p:54-:d:1587468
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    References listed on IDEAS

    as
    1. Helmi A. Boshnak, 2021. "Determinants of corporate social and environmental voluntary disclosure in Saudi listed firms," Journal of Financial Reporting and Accounting, Emerald Group Publishing Limited, vol. 20(3/4), pages 667-692, February.
    2. Ebrahim Mohammed Al-Matari & Mahfoudh Hussein Mgammal & Mushari Hamdan Alosaimi & Talal Fawzi Alruwaili & Sultan Al-Bogami, 2022. "Fintech, Board of Directors and Corporate Performance in Saudi Arabia Financial Sector: Empirical Study," Sustainability, MDPI, vol. 14(17), pages 1-23, August.
    3. Omer Saeed Habtoor, 2022. "Board Attributes and Bank Performance in Light of Saudi Corporate Governance Regulations," JRFM, MDPI, vol. 15(10), pages 1-27, September.
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