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

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.