Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector
Purpose – This study aims to compare the environmental, social, and governance (ESG) performance of Sharia-labeled and conventional companies in the energy industry and examine the effect of the Sharia label on ESG performance. This study is important because Sharia-labelled companies are expected...
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| Format: | Article |
| Language: | English |
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Center for Islamic Economics Studies and Development
2025-08-01
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| Series: | Jurnal Ekonomi dan Keuangan Islam |
| Subjects: | |
| Online Access: | https://journal.uii.ac.id/JEKI/article/view/37452 |
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| _version_ | 1849392911070789632 |
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| author | Azrul Afrillana Awaludin Ari Prasetyo Yusril Yusril Deky Chandra Saputra |
| author_facet | Azrul Afrillana Awaludin Ari Prasetyo Yusril Yusril Deky Chandra Saputra |
| author_sort | Azrul Afrillana Awaludin |
| collection | DOAJ |
| description |
Purpose – This study aims to compare the environmental, social, and governance (ESG) performance of Sharia-labeled and conventional companies in the energy industry and examine the effect of the Sharia label on ESG performance. This study is important because Sharia-labelled companies are expected to adhere to Islamic values reflected in good corporate governance, demonstrate social responsibility, and participate in environmental conservation.
Methodology – This study uses a quantitative approach with a fixed effect model panel data regression technique, involving financial and non-financial data from companies listed on the ISSI and non-ISSI in the 2016-2023 period.
Findings – This study found that Sharia companies in the energy sector have lower sustainability (ESG) performance than conventional companies, especially in the environmental dimension. The Islamic dummy variable shows a negative effect on ESG performance, while control variables, such as total assets, DER, and leverage, play an important role in influencing performance. There is no significant difference in social and governance dimensions between Islamic and conventional companies. This study recommends that Islamic stock index screening include sustainability aspects more comprehensively.
Implications – Policy makers, industry, and academics can use the findings of this study as recommendations to strengthen sustainable performance in Sharia-labelled companies.
Originality – This study analyzes sustainability performance in each industrial sector using materiality-based ESG performance.
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| format | Article |
| id | doaj-art-76c5ee76b9b947b29f2a4b2e6515a89f |
| institution | Kabale University |
| issn | 2088-9968 2614-6908 |
| language | English |
| publishDate | 2025-08-01 |
| publisher | Center for Islamic Economics Studies and Development |
| record_format | Article |
| series | Jurnal Ekonomi dan Keuangan Islam |
| spelling | doaj-art-76c5ee76b9b947b29f2a4b2e6515a89f2025-08-20T03:40:38ZengCenter for Islamic Economics Studies and DevelopmentJurnal Ekonomi dan Keuangan Islam2088-99682614-69082025-08-0111210.20885/JEKI.vol11.iss2.art3Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sectorAzrul Afrillana Awaludin0Ari Prasetyo1Yusril Yusril2Deky Chandra Saputra3Department of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, IndonesiaDepartment of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, IndonesiaDepartment of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, IndonesiaDepartment of Islamic Economics, Faculty of Economics and Business, Universitas Airlangga, Surabaya, Indonesia Purpose – This study aims to compare the environmental, social, and governance (ESG) performance of Sharia-labeled and conventional companies in the energy industry and examine the effect of the Sharia label on ESG performance. This study is important because Sharia-labelled companies are expected to adhere to Islamic values reflected in good corporate governance, demonstrate social responsibility, and participate in environmental conservation. Methodology – This study uses a quantitative approach with a fixed effect model panel data regression technique, involving financial and non-financial data from companies listed on the ISSI and non-ISSI in the 2016-2023 period. Findings – This study found that Sharia companies in the energy sector have lower sustainability (ESG) performance than conventional companies, especially in the environmental dimension. The Islamic dummy variable shows a negative effect on ESG performance, while control variables, such as total assets, DER, and leverage, play an important role in influencing performance. There is no significant difference in social and governance dimensions between Islamic and conventional companies. This study recommends that Islamic stock index screening include sustainability aspects more comprehensively. Implications – Policy makers, industry, and academics can use the findings of this study as recommendations to strengthen sustainable performance in Sharia-labelled companies. Originality – This study analyzes sustainability performance in each industrial sector using materiality-based ESG performance. https://journal.uii.ac.id/JEKI/article/view/37452Islamic labelESGSharia-compliantEnergy sector |
| spellingShingle | Azrul Afrillana Awaludin Ari Prasetyo Yusril Yusril Deky Chandra Saputra Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector Jurnal Ekonomi dan Keuangan Islam Islamic label ESG Sharia-compliant Energy sector |
| title | Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector |
| title_full | Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector |
| title_fullStr | Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector |
| title_full_unstemmed | Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector |
| title_short | Does Sharia compliance reflect better environmental, social, and governance (ESG)? Evidence from Indonesia’s energy sector |
| title_sort | does sharia compliance reflect better environmental social and governance esg evidence from indonesia s energy sector |
| topic | Islamic label ESG Sharia-compliant Energy sector |
| url | https://journal.uii.ac.id/JEKI/article/view/37452 |
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