Determinants and Consequent Carbon Emissions Disclosure of Islamic Bank: Evidence Southeast Asia

Abstract

Purpose: This study analyzed the role of independent directors and sharia supervisory board on carbon emissions disclosure and its effect on Islamic banks's financial performance in Southeast Asia. Design/methodology/approach: This study is a quantitative study using 28 Islamic banks in Southeast Asia for the period 2016-2022 as sample. This study uses the Global Reporting Initiative (GRI) carbon disclosure index consisting of 11 items to measure carbon disclosure. The fixed effect model is the model selected to estimate panel data. This study using ordinal least square (OLS) as data analysis method. Findings: The analysis shows that independent directors have a positive influence, besides sharia supervisory board does not influence carbon emissions disclosure. Moreover, carbon emission disclosure does not affect the financial performance of Islamic banks. Research limitations/implications: This study limited to Islamic banks in Southeast Asia, so maybe it could be had not represent all Islamic banks. The results reveal that Islamic Bank has started to respond the climate change issue through their action on decreasing carbon emissions on its operational. It could be a good sign and hoped that independent authorized organs or institutions on global or national scale will be more capable to encourage Islamic bank in reducing carbon emissions and disclosing their information. Originality/value: The study on the relationship between independent directors and sharia supervisory boards on carbon emission disclosure and its effect on firm performance is the first study conducted in the banking sector, more specifically sharia banking. Previous studies have mostly been conducted in carbon-intensive industrial sectors. In addition, this study also explains the causal relationship of carbon emission disclosure.