Universitas Gadjah Mada
Faculty of Economics and Business

Many countries are beginning to incorporate sustainability practices in their economic recovery efforts. This step aligns with the growing global awareness of increasingly extreme climate change. The government is also encouraging the implementation of sustainability practices in all sectors, including Islamic banking.

To address this challenge, the Master of Management Study Program (MM FEB UGM) held an Executive Series titled "Building A Green Economic Future: Practical Approaches and Challenges in Sustainable Finance" on Friday, September 13, 2024, featuring several practitioners in the field of Islamic banking. The event was held offline at the Sukadji Ranuwihardjo Auditorium and was attended by hundreds of MM FEB UGM students in Yogyakarta and Jakarta.

Saut Parulian Saragih, SEVP of Digital Banking at PT BSI Tbk, said sustainability principles have been integrated into Islamic banking practices. The principle of sustainability in Islamic banking is rooted in the concept of Maqashid Sharia.

"The principles of Maqashid Sharia are to protect religion, life, intellect, wealth, descendants, and the environment," he explained.

He also explained why the banking sector needs to implement sustainability principles. Banks need to adopt these principles because 60-70% of the money in circulation flows through them. "Banks have the power to choose which industries can receive loans. In this context, banks can provide more accessible financial support to industries that have already adopted sustainability principles," he said.

In addition, Saut mentioned that the Financial Services Authority (OJK) regulations, specifically No. 51 and No. 03 of 2017, provide clear guidance on the four roles of banks in environmental sustainability. These include the implementation of green product portfolios, human resource development, governance, and organization, as well as policies, SOPs, and risk management. He gave an example of how Islamic banks finance industries that support sustainability principles through a green financing portfolio, with total financing reaching IDR 13.5 trillion by June 2024.

Saut also touched on the relationship between digital transformation and environmental sustainability. He believes that digital transformation allows banks to conduct processes such as online account opening and loan applications and adopt paperless practices, reducing greenhouse gas emissions and deforestation. "Today, the sustainable finance sector has great potential because more and more consumers are becoming environmentally conscious. This shift is also influencing consumer and investor preferences to choose companies that embrace sustainability principles," he said.

Meanwhile, Mr. Bob T. Ananta, Member of the IBI Management Board & Deputy Director of PT BSI Tbk. explained that the Maqashid Sharia principles align with the sustainable business concept of the Triple Bottom Line, which consists of the 3Ps: People, Planet, and Profit.

One of the Maqashid Sharia principles, Hifdz Al Bi'ah, advises people to protect the environment for the enjoyment of future generations.

"Although Islamic banking already fulfills the sustainability principles of Maqashid Sharia, the next challenge is how banks can maintain these sustainability principles in the future," he explained.

Reportage: Najwah Ariella Puteri
Editor: Kurnia Ekaptiningrum 

Sustainable Development Goals