Environmental Disclosure of Islamic Financial Institutions (IFIs): Preliminary Evidence from Malaysia

Abstract

Preservation of the natural environment is one aspect of social responsibility that is expected to be undertaken by Islamic Financial Institutions (IFIs) consistent with the Islamic perspective of corporate social responsibility (CSR) where human beings are regarded as ‘khalifah’ (vicegerent on earth) and are required to take care of the natural environment entrusted to them. Using a sample of thirty-seven (37) IFIs, this paper presents preliminary findings on the environmental disclosure of IFIs in Malaysia for the year 2010. The results gleaned from this study revealed that environmental disclosure amongst IFIs in an emerging economy such as Malaysia is still low. The findings from an investigation into the key areas of environmental disclosure revealed that the focus of the IFIs in the context of environment revolves on activities toward the conservation of the environment, environmental education and on environmental audit and independent verification of environmental information. The implication of the findings from this study suggests that IFIs as capital providers and facilitators of industrial activities need to embark on a more holistic and systematic way of integrating environmental policies, procedures and processes into their overall business activities so as to improve their environmental performance and the disclosure of environmental information.

Keywords: Environmental disclosure, corporate social responsibility, Islamic financial institution