The global financial system is under growing pressure from issues like climate change, environmental damage, social inequality, and economic instability. These challenges have sparked more discussion about the responsibilities of banks in supporting sustainable development. Within this broader conversation, Islamic banking offers a unique model. It does not see financial transactions as neutral, but instead builds them around ethical principles, social responsibility, shared risk, and a close connection to the real economy.

This study explores how sustainability aligns with Islamic banking from three angles: conceptual, institutional, and empirical. It argues that, in Islamic banking, sustainability is not an external requirement. Rather, it forms part of the system’s core values. The paper also reviews key methods used to assess sustainability in Islamic banks. These include corporate social responsibility reporting, ESG ratings, indices based on Maqasid al-Shari’ah, and combined measurement frameworks. The review finds that no single method can fully reflect the complex nature of sustainability in this context.

Looking at empirical research, the study finds that better sustainability performance often goes hand-in-hand with stronger financial outcomes. However, the relationship depends on how performance is measured, which indicators are used, and the regional setting. In general, the results support the need for comprehensive, multidimensional ways to assess sustainability. The study offers useful takeaways for researchers, decision-makers, and professionals working to strengthen sustainable Islamic finance.