Framework of Islamic sustainable and responsible investment based on environment, social and governance concept

Sustainable and responsible investment (SRI) and environment, social, and governance (ESG) are two concepts which, presently are frequently being discussed, especially in the investment sector. The United Nations developed both concepts - Principles for Responsible Investment (UN-PRI) to create better practices in managing investment funds. Thus, this study attempts to explore these two concepts and analyses their criteria from Shariah perspectives. This research aims to answer four main objectives, which are; to examine the concept of SRI and its relationship with ESG and sustainable development goals (SDG), to explore the current scenario and existing practices of SRI issuance, to determine the criteria of Islamic SRI based on the ESG concept and to develop Islamic SRI framework and its components as a regulation or guidance to the industry. This study applied a qualitative method comprising document analysis and expert interviews. The study found that there were significant differences between SDGs, ESGs and SRIs concepts, especially in terms of aims, scopes, year of establishment and their principles. Besides clarifying three ASEAN standards and two local guidelines, the study confirmed the theory of stakeholders as the main theory applied in expanding the ESG and SRI development whereby the governments of ASEAN countries collectively agreed to develop ASEAN standards that govern the current SRI practices. This study also analysed the issuance of four projects under those standards and guidelines, in which two issuances were at the ASEAN level, and the other two were at the local level. This study found that some of the existing criteria of ESG, such as human rights, freedom of censorship, freedom of association and freedom of expression, are not per Islamic teachings and are not suitable to be matched with Islamic ESG criteria. Therefore, this study contributes an Islamic SRI framework as a new regulated framework or as a new guidance to the industry.