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Navigating ESG risks in banking: The role of green finance, policy, and FinTech in Islamic and conventional banks

Author

Listed:
  • Altamimi, Hissah Abdullah
  • Hassan, M. Kabir
  • Rabbani, Mustafa Raza
  • Kiran, Madiha

Abstract

Integrating green finance, monetary and fiscal policy, and environmental, social, and governance (ESG) factors into banks' risk management strategies in emerging economies is an essential yet underexplored area of research. This study explores this association, situated in the socio-cultural milieu of Asian countries. In this region, lower levels of technology and poor quality of governance implementation lead to a bias towards short-term perspectives. Drawing on agency and stakeholder theories, the study aims to investigate the moderating role of the Fintech Technology Index in green finance, fiscal, and monetary policy on ESG performance. The sample includes 296 banks (52 Islamic, 244 conventional) with 2970 observations from 22 Asian countries during 2013–2022. The study further explores the positive roles of green finance in ESG. It illustrates the more substantial impact of FinTech on both Islamic and conventional banks. Notably, the study found that the impact of technology indicators on ESG performance is more significant in Islamic banks, where fiscal policy is more aligned with that of conventional banks in Asian economies. Policymakers and leaders should therefore establish regulations that encourage technology-based initiatives and governance that promote sustainable activities, thereby minimizing ESG issues, as suggested by additional analysis of ESG performance across individual pillars.

Suggested Citation

  • Altamimi, Hissah Abdullah & Hassan, M. Kabir & Rabbani, Mustafa Raza & Kiran, Madiha, 2026. "Navigating ESG risks in banking: The role of green finance, policy, and FinTech in Islamic and conventional banks," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 1537-1558.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:1537-1558
    DOI: 10.1016/j.eap.2026.05.006
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance

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