SUSTAINABLE INVESTING AND ISLAMIC FINANCE: EVIDENCE FROM THE ORGANISATION OF ISLAMIC COOPERATION (OIC) COUNTRIES

Purpose — In the aftermath of the Global Financial Crisis, sustainable investing and Islamic finance have become two of the most rapidly growing areas of finance. In the literature on Islamic equities, there are relatively few studies that have integrated sustainability factors into Islamic finance. To address this significant gap in knowledge and evidence, the objective of this paper is to contribute to the literature on the integration of sustainable investing into Islamic finance.

Design/Methodology/Approach — This paper first examines the comparative performance of investing in the sustainability equity indices from those Organisation of Islamic Cooperation (OIC) countries that are partners of the Sustainable Stock Exchanges (SSE) initiative. This paper then conducts a case study on Borsa Istanbul, which has the best-performing sustainability equity index from OIC countries.

Findings — The findings of this paper reveal the heterogeneity in sustainable investment performance, and suggest the potential of obtaining superior risk adjusted returns in certain economies.

Originality/Value — This paper contributes to the literature that links sustainable investing with Islamic finance, specifically in the context of OIC countries and by focusing on the case of Borsa Istanbul.

Research Implications — This research draws policy and practical implications on how sustainable investing can bridge the gap between Islamic and conventional financial markets.