Impact of Green Finance and ESG on the Sustainable Performance of Islamic Banks

Purpose: This Systematic Literature Review (SLR) critically explores the intersection of green finance, ESG frameworks, and sustainable performance within Islamic banking. It interrogates the compatibility of Islamic finance principles with evolving global sustainability agendas, focusing on ethical alignment and value-based financial transformation. Design/Methodology/Approach: The review synthesizes insights from over 80 peer-reviewed articles published between 2015 and 2025. Using bibliometric and thematic analysis—supported by VOSviewer—the study maps co-authorship networks, citation clusters, and emerging thematic trends. It emphasizes instruments such as green sukuk, waqf-linked investments, and Shariah-compliant ESG governance mechanisms. Findings: Results indicate a growing convergence between ESG principles and Islamic financial ethics, especially in Malaysia, Indonesia, and the MENA region. However, the literature exposes fragmentation in ESG reporting standards, lack of robust environmental metrics, and limited digital infrastructure. Integration of Islamic social finance into ESG frameworks remains insufficient. Implications/Originality/Value: This review offers a multidimensional synthesis bridging normative Islamic ethics with practical ESG applications. It calls for contextualized ESG-Shariah frameworks, rigorous empirical assessments of impact, and cross-border regulatory harmonization to empower Islamic banks as pivotal actors in the global ethical finance and climate resilience movement.