The Influence of Climate Concerns, Fintech, and Policy Uncertainty on Green and Carbon-Based Investments in Islamic and Conventional Finance

Abstract

Abstract Integrating green finance, monetary and fiscal policy, and environmental, social, and governance (ESG) is an important yet unexplored area of research in the risk management strategies of banks in emerging economies. This study ventures into an exploratory examination of this association, situated in the socio-cultural milieu of Asian countries. In this region, the lower implementation of technology and governance quality leads to a bias towards short-term perspectives. Drawing on the role of agency and stakeholder theory, the study aims to investigate the moderating role of the Fintech Technology Index in green finance, fiscal and monetary policy on ESG performance. The sample includes 296 banks (52 Islamic, 244 conventional) with 2970 observations from 22 Asian countries during 2013–2022. The study further explores the role of green finance and monetary policy towards ESG, which are very positive, illustrating the more substantial effect of the FinTech technology index across Islamic and conventional banks. Notably, the study found that the impact of technology indicators on ESG performance is more influenced in Islamic banks, where the role of fiscal policy is more aligned with the conventional banks of Asian economies. Policymakers and leaders should, therefore, establish regulations that encourage technology-based initiatives and governance that promote sustainable activities, minimizing ESG issues, as suggested by additional analysis of ESG performance along with individual pillars.

JEL Classifications: G14, G34, H26 Keywords: Green Finance: Fiscal and Monetary Policy: ESG performance: FinTech Technology: Stakeholder theory.