Beyond Profit: The Role of ESG Disclosure in Enhancing Financial Performance of Bank Syariah Indonesia

Mohammad Hatta Fahamsyah; Muhammad Najamuddin Dwi Miharja; Stevanus Willyam Adi Setiawan

doi:10.59059/jupiekes.v4i2.3242

Authors

Mohammad Hatta Fahamsyah Universitas Pelita Bangsa
Muhammad Najamuddin Dwi Miharja Universitas Pelita Bangsa
Stevanus Willyam Adi Setiawan Universitas Pelita Bangsa

DOI:

https://doi.org/10.59059/jupiekes.v4i2.3242

Keywords:

ESG Disclosure, ESG Disclosure, Financial Performance, Financial Performance, Islamic Banking, Islamic Banking, Sustainability, Sustainability, Sustainable Finance, Sustainable Finance

Abstract

The growing adoption of Environmental, Social, and Governance (ESG) principles has transformed the banking industry from a profit-oriented business model toward sustainable value creation. In the Islamic banking sector, ESG disclosure is closely aligned with the principles of Maqasid al-Shariah, which emphasize ethical conduct, transparency, social responsibility, and environmental stewardship. This study aims to examine the effect of ESG disclosure on the financial performance of Islamic commercial banks in Indonesia during the 2020–2025 period. The research employs a quantitative explanatory approach using panel data obtained from the annual reports and sustainability reports of Islamic commercial banks. ESG disclosure is measured through the environmental, social, and governance dimensions, while financial performance is represented by Return on Assets (ROA) and Return on Equity (ROE). Panel data regression analysis is applied to evaluate both the partial and simultaneous effects of ESG disclosure on financial performance. The findings indicate that environmental, social, and governance disclosures each have a positive and significant effect on financial performance, while the three dimensions jointly contribute to improving the profitability of Islamic banks. Among the ESG dimensions, governance disclosure demonstrates the strongest influence, highlighting the importance of transparency, accountability, and effective Shariah governance in achieving sustainable financial performance. These findings contribute to the literature on sustainable finance and Islamic banking by providing empirical evidence from Indonesia and offer practical implications for banking practitioners, regulators, and investors in strengthening ESG implementation to enhance long-term competitiveness and sustainable value creation.

References

Adirestuty, F., Adawiyah, R. A. A., Ratnasari, R. T., Chazanah, I. N., & Irsyad, S. M. (2024). Analisis Laporan Keberlanjutan Studi Komparasi Bank Syariah Indonesia dan Maybank Islamic Berhad 2019-2022. Jurnal Ilmiah Ekonomi Islam, 10(1), 769–777. https://doi.org/10.29040/jiei.v10i1.11152

Albinurrizqi, D., Hamzani, U., & Astarani, J. (2025). Pengaruh Pengungkapan ESG, Leverage, dan Likuiditas Terhadap Kinerja Keuangan Perusahaan. JEMSI (Jurnal Ekonomi, Manajemen, Dan Akuntansi), 11(4), 2579–2591. https://doi.org/10.35870/jemsi.v11i4.4433

Alghafes, R., Karim, S., Aliani, K., Qureishi, N., & Alkayed, L. (2024). Influence of key ESG factors on Islamic banks’ financial performance: Evidence from GCC countries. International Review of Economics & Finance, 96(A), 103629. https://doi.org/10.1016/j.iref.2024.103629

Boudawara, Y., Toumi, K., Wannes, A., & Hussainey, K. (2023). Shari’ah governance quality and environmental, social and governance performance in Islamic banks. A cross-country evidence. Journal of Applied Accounting Research, 24(5), 1004–1026. https://doi.org/10.1108/jaar-08-2022-0208

Cahyaningtyas, S., Muhsyaf, S., & Husnaini, W. (2024). Environmental, Social, and Governance (ESG) Disclosure and Company Performance: Empirical Evidence in Indonesian Banking. Jurnal Ekonomi Akuntansi Dan Manajemen, 23(2), 134–154. https://doi.org/10.19184/jeam.v23i2.47084

Dian Fajarini, et al. (2026). Peran Penerapan ESG terhadap Kinerja Keuangan Perbankan pada Negara Terdampak Tekanan Ekonomi Global. JURNAL RISET EKONOMI DAN AKUNTANSI (JREA), 4(1). https://doi.org/10.54066/jrea-itb.v4i1.3839

Fathihani, F., Santoso, N., Sulistiyowati, R., & Veronica, M. (2025). ESG Disclosure and Financial Performance: The Moderating Role of Firm Size in Indonesian Banking Sector. Shirkah: Journal of Economics and Business, 10(3), 331–348. https://doi.org/10.22515/shirkah.v10i3.960

Fauzi, et al. (2026). Exploring the Evolution and Future Directions of ESG Reporting Research in Accounting: A Bibliometric Analysis . MUQADDIMAH: Jurnal Ekonomi, Manajemen, Akuntansi dan Bisnis, 4(2). https://doi.org/10.59246/muqaddimah.v4i2.1953

Gutiérrez‐Ponce, H., & Wibowo, S. (2023). Do Sustainability Activities Affect the Financial Performance of Banks? The Case of Indonesian Banks. Sustainability, 15(8). https://doi.org/10.3390/su15086892

Kardilah, K., Azis, M., & Sukartini, M. (2025). PENGARUH GREEN ACCOUNTING, ESG DISCLOSURE DAN UKURAN PERUSAHAAN TERHADAP KINERJA KEUANGAN PADA SEKTOR PERBANKAN. Jurnal Riset Ilmu Akuntansi, 6(2), 177–187. https://doi.org/10.37478/jria.v6i2.6291

Mallin, C., Farag, H., & Ow-Yong, K. (2014). Corporate Social Responsibility and Financial Performance in Islamic Banks. Corporate Finance: Governance. https://doi.org/10.2139/ssrn.3027644

Mohammad, W., & Wasiuzzaman, S. (2021). Environmental, Social and Governance (ESG) disclosure, competitive advantage and performance of firms in Malaysia. Cleaner Environmental Systems, 2, 100015. https://doi.org/10.1016/j.cesys.2021.100015

Muneer, S., Singh, A., Choudhary, M., Alshammari, A. S., & Butt, N. (2025). Does Environmental Disclosure and Corporate Governance Ensure the Financial Sustainability of Islamic Banks? Administrative Sciences, 15(2), 54. https://doi.org/10.3390/admsci15020054

Nur Asrin, et al. (2025). Pengaruh Environmental, Social, And, Governance dan Kekuatan Chief Executive Officer Terhadap Kinerja Keuangan Perbankan di BEI. Jurnal Riset Rumpun Ilmu Ekonomi, 4(2). https://doi.org/10.55606/jurrie.v4i2.6116

Platonova, E., Asutay, M., Dixon, R., & Mohammad, S. (2018). The Impact of Corporate Social Responsibility Disclosure on Financial Performance: Evidence from the GCC Islamic Banking Sector. Journal of Business Ethics, 151, 451–471. https://doi.org/10.1007/s10551-016-3229-0

Shalhoob, H. (2025). ESG Disclosure and Financial Performance: Survey Evidence from Accounting and Islamic Finance. Sustainability, 17(4), 1582. https://doi.org/10.3390/su17041582

Yusuf, M., Dasawaty, E. S., Esra, M. A., Apriwenni, P., Meiden, C., & Fahlevi, M. (2023). Integrated reporting, corporate governance, and financial sustainability in Islamic banking. Uncertain Supply Chain Management, 12, 273–290. https://doi.org/10.5267/j.uscm.2023.9.022