Green Banking A Perspective of Indonesian Sharia Banking: Between Regulation, Ethics, and Sustainability

Abstract

The climate crisis places the banking sector in a strategic position as a key allocator of capital with direct environmental consequences. This study examines the implementation of green banking in Indonesian Islamic banking by critically exploring the interaction between regulation, Maqasid al-Shariah ethics, and sustainability performance. The research employs a qualitative-critical approach with a socio-legal and institutional analysis of regulations, sustainability reports, and financing practices of Islamic commercial banks from 2019 to 2024. The findings reveal that green banking practices in Indonesian Islamic banks remain largely symbolic and compliance-driven, lacking substantive transformation in environmentally risky financing portfolios. Maqasid al-Shariah ethics, particularly the principle of Hifz al-Bi’ah (environmental protection), are insufficiently operationalized in financing decisions. Sustainability is treated as an external obligation, while Islamic social finance instruments remain fragmented from green banking strategies. This study highlights the urgent need for a binding Shariah-based governance framework, the operationalization of Islamic ecological ethics, and the integration of Islamic social finance into green banking. The contribution of this research lies in proposing a contextual and impact-oriented conceptual framework for Shariah-based green banking in Indonesia.