The Role of Sharia Stocks in Driving the Achievement of the SDGs: Empirical Evidence from Sharia Stock Indices in Indonesia

Abstract

Achieving the Sustainable Development Goals (SDGs) requires the active involvement of the financial sector in promoting inclusive and sustainable economic development. Within the framework of Islamic economics, Islamic capital markets particularly Islamic stocks are considered strategic instruments due to their emphasis on justice, sustainability, and strong linkages with the real sector. This study aims to examine the role of Islamic stock performance in promoting SDGs achievement in Indonesia. A quantitative approach is employed using panel data regression on firms listed in the Indonesian Sharia Stock Index (ISSI) over the 2015–2023 period. Islamic stock performance is measured by stock returns, volatility, and market capitalization, while SDGs achievement is proxied by the SDG index score, poverty rate, and employment ratio. The Fixed Effect Model estimation reveals that Islamic stock returns and market capitalization have a positive and significant effect on SDGs achievement, whereas stock volatility has a significant negative effect. These findings suggest that Islamic capital markets contribute meaningfully to sustainable development, although their effectiveness is highly dependent on market stability. This study provides empirical evidence for Islamic development economics literature and offers policy insights for strengthening the role of Islamic capital markets in supporting the SDGs agenda in Indonesia.