ESG stands for Environmental, Social, and Governance. Investors are increasingly applying these non-financial factors as part of their analysis process to identify material risks and growth opportunities (CFA).
ESG is taking on an even greater significance in light of recent events: companies have the responsibility and resources to accomplish positive climate action, building a more sustainable, resilient future and “putting money where their mouth is” (plans.earth).
Islamic finance is one of the highly social responsible investment in finance sector. Islamic finance by nature is very much complementary due its restricted investment criteria.
Islamic capital markets and Islamic finance practitioners should develop new policies and procedures for Islamic finance institutions to achieve ESG goals.