Green Banking Practice of Indonesia’s Islamic Banks

The banking sector is increasingly involved in environmental protection and management initiatives by introducing green banking practice. Green banking is very much in line with the principles of Islamic banks that underlie its practice on Islamic values, which among other things prohibit humans from making damage on earth. The purpose of this study is to determine the green banking practice in Indonesia’s Islamic Banks from 2014-2017 using environmental risk index. Environmental risk index uses 44 variables which are grouped into ten thematic vectors that relate to different aspects of environmental risk management. This study reveals that the green banking practice in Indonesia’s Islamic Banks is still quite low. In average, Indonesia’s Islamic Banks excellent in water management, paper management, employee involvement in environmental commitment and collaboration with NGOs while in terms of carbon neutrality, waste management, environmental due diligence, ESG specific funds, environmental training and involvement in initiatives recognized environment still needs improvement. The finding of this study provide a significant contribution in green banking practice of Indonesia’s Islamic Banks. They can find out how much green banking practice has so far been running and in what ways they need improvements to achieve the maximum Environmental Risk Index score.