Is Green Finance a Performance Driver? A Global Comparative Analysis of Islamic and Conventional Banks

Abstract

Banks can contribute to mitigating the evolving climate risks by financing activities that are free from negative effects on the environment. This financing, or green financing, may enhance the bank’s image and lead to increased financial performance of Islamic and conventional banks. The main objective of this study was to determine whether there is a difference in the impact of green finance on the financial performance of Islamic versus conventional banks. This objective was achieved by conducting a quantitative study on selected sample of Islamic and conventional banks that provide green finance for the years 2021 to 2024. Green finance activities were measured using a developed index that contains many financial and non-financial components while financial performance was measured using data extracted from financial statements and market prices. Collected data were analyzed using the multiple linear regression method. The results revealed that green finance has a positive but insignificant impact on the financial performance of both Islamic and conventional banks and there is no difference in that impact between the two types of banks except for that the magnitude of the impact is more for conventional banks.