Environmental reporting and financial performance of listed Islamic Banks in Bangladesh: Evidence from Shariah-Based institutions

Abstract

This study examines the status and financial implications of environmental reporting among listed Islamic (Shariah-based) banks in Bangladesh over the period 2018 to 2024. Using a comprehensive 46-item environmental reporting checklist covering six thematic dimensions, environmental disclosure scores were constructed from annual reports of eight listed Islamic banks, yielding 56 firm-year observations. The grand mean environmental disclosure score stands at 33%, with a gradual upward trend from 30% in 2018 to 35% by 2024, indicating modest but consistent progress in environmental accountability. Panel regression analysis reveals that environmental audit and environmental cost reporting exert a significant positive influence on both return on assets (ROA) and return on equity (ROE). In contrast, environmental investment reporting is found to negatively affect profitability when considered in isolation, suggesting short-term cost burdens associated with green investment activities. Among control variables, firm size relates positively to financial performance while firm age exerts a negative effect. These findings underscore the importance of institutionalizing transparent environmental accountability mechanisms, particularly environmental auditing and cost management practices, as drivers of sustainable financial performance. The study contributes original empirical evidence to the environmental accounting literature within the context of Islamic banking in an emerging economy and carries practical implications for regulators, bank managers, and sustainability policymakers in Bangladesh and comparable jurisdictions.