The Impact of Sustainable Finance, Corporate Governance on The Profitability of Islamic Commercial Banks in Indonesia

Abstract

The development of the Islamic banking industry requires banks not only to achieve high profitability but also to implement sustainability principles and good corporate governance. Profitability is an important indicator for measuring a company’s financial performance. The implementation of Sustainable Finance and Good Corporate Governance is expected to contribute to increasing profitability while ensuring the sustainability of Islamic banking operations.

The objective of this study is to analyze the effects of Sustainable Finance and Good Corporate Governance on the profitability of Islamic Commercial Banks during the 2021–2025 period. The research method employed is multiple linear regression analysis using secondary data obtained from annual financial reports, Sustainable Finance reports, and Good Corporate Governance reports of Islamic Commercial Banks for the 2021–2025 period. The independent variables in this study are Sustainable Finance and Good Corporate Governance, while the dependent variable is profitability.

The results of the study indicate that Sustainable Finance has a significant effect on profitability, with a significance value of 0.000 < 0.05. Meanwhile, Good Corporate Governance does not have a significant effect on profitability, with a significance value of 0.634 > 0.05. Simultaneously, Sustainable Finance and Good Corporate Governance have a significant effect on profitability, with a significance value of 0.000 < 0.05.

Based on these findings, it can be concluded that Sustainable Finance has a significant partial effect on profitability, while Good Corporate Governance does not have a significant partial effect on profitability. Simultaneously, both variables have a significant effect on profitability. This study is expected to provide important implications for Islamic Commercial Banks to continuously improve the implementation of sustainable financing and strengthen good corporate governance practices.