Weather, Sustainability and Islamic Finance

Abstract

The first essay examines how weather conditions affect stock market performance in the Saudi Stock Exchange (TASI). To investigate this relationship, the study employs multiple regression analysis in conjunction with the GJR-GARCH model. we analyze the effects of Air Temperature, Relative Humidity, Wind Speed, and Rainfall on TASI returns. Results indicate Air Temperature has the most significant influence. The impact of weather weakened after foreign investors entered the market, suggesting a shift in investor behavior. Sectoral analysis reveals that the Energy, Information Technology, and Utilities sectors are the most resilient to weather variations. This second essay examines the impact of Environmental, Social, and Governance factors on the profitability of conventional and Islamic banks. Using structural equation modeling, the findings reveal that the Environmental pillar positively impacts profitability in Islamic banks. The Social pillar negatively affects profitability in Islamic banks, while the Governance pillar increases profitability in conventional banks but reduces it in Islamic banks. These results highlight the need for Islamic banks to optimize social initiatives and governance frameworks while conventional banks should enhance environmental strategies.