Contemporary Eco-Maqashid Governance and Circular Economy in Indonesia’s Islamic Capital Market: Addressing the “Islamic but Not Green” Paradox
DOI:
https://doi.org/10.32332/milrev.v5i2.12673Keywords:
Eco-Maqashid; Circular Economy; Islamic Capital Market; Sustainable Islamic Finance; ESG; Sharia Governance.Abstract
Climate change, resource depletion, and ecological degradation increasingly challenge financial systems to integrate sustainability into investment governance. This study examines whether Indonesia’s Islamic capital market has adequately translated sharia principles into substantive ecological responsibility and addresses the emerging “Islamic but not green” paradox. Employing a qualitative juridical-empirical design, the study combines normative analysis of Islamic legal sources, MUI Fatwa No. 86/2023, OJK regulations, and Sharia Securities List (Daftar Efek Syariah/DES) screening criteria with empirical document analysis of issuers operating in environmentally sensitive sectors, including mining, energy, plantations, and raw materials. Annual reports, sustainability reports, ESG disclosures, and publicly available environmental evidence were analysed through open coding, axial coding, thematic analysis, source triangulation, and coding validation. The findings demonstrate that existing DES screening predominantly emphasizes sectoral permissibility and financial ratios, while ecological performance indicators—including carbon intensity, deforestation exposure, pollution records, biodiversity protection, waste management, and ecosystem restoration—remain insufficiently integrated. This regulatory configuration produces a gap between formal sharia compliance and measurable environmental accountability, constituting the “Islamic but not green” paradox. To address this gap, the study develops an Eco-Maqashid Governance Framework that operationalizes Maqashid al-Sharia through five interconnected dimensions: ecological protection, protection of life and welfare, responsible wealth management through circular economy practices, intergenerational justice, and ethical governance and transparency. The framework contributes theoretically by extending contemporary Islamic finance beyond procedural compliance toward substantive ecological accountability. It contributes practically by providing policymakers, regulators, and investors with a faith-based governance model for integrating circular economy and ESG principles into Islamic capital market screening and monitoring, strengthening long-term sustainability in Islamic investment governance.
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