The Role of Shariah Governance in Realizing ESG Criteria in Financial Markets

With the development of Islamic financial markets, the role and position of Shariah Governance as one of the key factors in the survival and expansion of the Islamic financial territory has become increasingly important. In this way, International Islamic financial institutions, such as the IFSB and the AAOIFI, have standardized and developed criteria for measuring Shariah Governance in Islamic financial institutions. By examining Islamic Shariah rules and teachings, it becomes clear that currently standards of Shariah governance are limited to corporate governance and cover only a small part of the criteria and rules in Islamic jurisprudence and ethics. On the other hand, ESG issues have been considered by investors, policymakers and authority bodies over the last decade. In Islamic jurisprudence and ethics, the implementation of the principles and criteria of environmental protection, social issues and corporate governance have been emphasized positively and negatively as well as binding or non-binding, so that Shariah rules cover all relevant components to ESG in the conventional system. The findings of this research are obtained through analytical-descriptive method and shows that by investigation in jurisprudential principles, Holi Quran verses and hadiths, it is clear that the realization of ESG issues within the Shariah governance framework in addition to expanding the territory of Shariah governance, will bring greater mandatory. As a result, it will promote and strengthen the position of the ESG and the rule of law in the Islamic financial system, Especially in Islamic capital markets. This study with descriptive and analytical approach