Diversity and Inclusion on ESG Performance: Between Islamic and Conventional Banks

On 27 April 2025, IAEI UK (The Indonesian Association of Islamic Economists in the UK) hosted a vibrant online discussion spotlighting a recent academic publication by two of its executive committee members, Dr Yunice Karina Tumewang (University of Southampton) and Kemala Putri Ayunda MSc (University of Sheffield). Held via Zoom and warmly attended by members across the association, the event was moderated by Wahyu Saripudin, a PhD student at the University of Exeter and head of IAEI UK’s Research and Development Division.

This scholarly forum was more than a discussion, it was a moment of celebration, showcasing the global contributions of Indonesian academics in the field of sustainable and Islamic finance. The featured article, titled “The Effects of Diversity and Inclusion on ESG Performance: A Comparison Between Islamic and Conventional Banks,” was recently published in the Borsa Istanbul Review. The paper is available online and can be accessed via https://doi.org/10.1016/j.bir.2024.10.001.

The study presents an empirical investigation into how Diversity, Inclusion, and People Development (DIP) practices influence Environmental, Social, and Governance (ESG) performance in the banking sector. Covering 90 banks (31 Islamic and 59 conventional) across 11 countries between 2015 and 2022, the research employs newly developed DIP scores sourced from Refinitiv databases. These scores encompass a range of organisational efforts—from gender representation and board diversity, to employee development, disability inclusion, and flexible working arrangements.

During the session, the authors shared their motivation for the study, noting that while ESG has become a global buzzword, its human dimensions—particularly the internal dynamics of diversity and inclusion—remain underexplored. This gap is especially evident in Islamic finance, where ethical and value-driven mandates should, in theory, place such considerations at the heart of business practice. Their findings confirm this hypothesis: banks with higher DIP scores consistently perform better in ESG, particularly on environmental and social dimensions. Interestingly, this positive effect is more pronounced in Islamic banks than their conventional peers.

This suggests a natural synergy between Islamic principles—such as maqasid al-shariah, which emphasise human welfare, social justice, and equity—and contemporary ESG goals. The paper argues that Islamic banks, by internalising inclusive values, can not only strengthen stakeholder trust but also improve operational sustainability and resilience in the long term.

Participants in the event engaged enthusiastically with the discussion, raising questions on methodology, cross-country comparisons, and regulatory implications. Many reflected on how the findings could inform corporate governance reforms, particularly in jurisdictions where Islamic finance plays a significant role. Wahyu Saripudin, as moderator, emphasised that the study bridges a crucial gap between academic rigour and applied Islamic economics—showing how measurable organisational behaviour can align with spiritual and ethical frameworks.

Another important takeaway from the discussion was the paper’s policy relevance. While many regulators focus narrowly on board-level gender quotas, the authors suggest a broader framework for diversity, encompassing support for employees with disabilities, family-friendly workplace policies, and equitable career advancement opportunities. The paper thus offers practical insights for bank managers and policymakers alike, especially in light of growing investor and consumer demands for socially responsible business.

The event concluded on an uplifting note, reinforcing IAEI UK’s commitment to fostering academic excellence and collaborative learning among its members. As sustainability and ethical finance continue to dominate global discourse, the research contributions of scholars like Tumewang and Ayunda demonstrate how Islamic economic thought is not only relevant but essential in shaping a more inclusive and resilient financial future.