Impact of Islamic Label on Environmental, Social, and Governance Performance of Emerging Markets through Sharia-Compliant Firms

Abstract

This study aims to examine the relationship between Islamic label and their environmental, social and governance (ESG) performance in emerging markets. In this study multiple regression analysis is used to see how the independent (Islamic label) and dependent variables (ESG) are related. Whereas, data is collected from publicly available sources such as financial databases, government records, or scientific research. For this purpose, the study used the data of 6056 companies across 57 countries for the period of 2004 to 2023. The study used Thomson Reuters ASSET4 ESG data as a proxy for evaluating environmental, social, and governance (ESG) policies. The findings of the study indicate that the effect of Islamic label in the operations of Sharia-compliant enterprises in developing markets has a beneficial effect on their ESG performance especially in environmental and social indicators. The results showed that Sharia-Compliant firms do better in terms of ESG than conventional enterprises.