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ESG compliance and financial performance: a comparative study of Islamic and conventional banks in the MENAT region

Rania Abdelfattah Salem & Muhammed Abualazm

Review of Accounting and Finance2026https://doi.org/10.1108/raf-08-2024-0333article
AJG 2ABDC B
Weight
0.50

What the paper says

Purpose This study aims to examine how environmental, social and governance (ESG) compliance affects the financial performance of Islamic and conventional banks in the MENAT region, addressing a gap in understanding ESG’s role within Shariah-compliant banking. Design/methodology/approach Using panel data from 43 banks (2018–2022) and a system Generalized Method of Moments estimator, this study evaluates the impact of overall ESG scores on profitability and conducts an exploratory assessment of the ESG dimensions. Findings ESG influences profitability in both banking models but in nonlinear ways. Islamic banks exhibit a concave relationship, where moderate ESG engagement enhances ROA before marginal benefits decline. Conventional banks display a convex pattern: ESG initially imposes costs but becomes beneficial at higher adoption levels. ESG dimensions show heterogeneous effects reflecting differences in governance structures and regulatory environments. Practical implications Results highlight the need for banking-model-specific ESG strategies. Policymakers should strengthen disclosure standards and support sustainable finance instruments, while banks can enhance performance by aligning ESG initiatives with their operational and ethical frameworks. Originality/value This study provides one of the first comparative analyses of ESG–performance dynamics in Islamic and conventional banks in the MENAT region, offering new evidence on non-linear effects and institutional differences in sustainability integration.

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https://doi.org/https://doi.org/10.1108/raf-08-2024-0333

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@article{rania2026,
  title        = {{ESG compliance and financial performance: a comparative study of Islamic and conventional banks in the MENAT region}},
  author       = {Rania Abdelfattah Salem & Muhammed Abualazm},
  journal      = {Review of Accounting and Finance},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1108/raf-08-2024-0333},
}

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ESG compliance and financial performance: a comparative study of Islamic and conventional banks in the MENAT region

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.