Abstract
ESG integration in Islamic banking lacks Sharia alignment, harmonized regulations, and globally recognized standards, limiting sustainable Islamic finance development worldwide. This research examines the urgency of ESG integration, identifies normative barriers, evaluates Islamic banking contributions, and proposes a Sharia-based sustainable finance framework for global application. Methodology: This normative legal research employed statutory, conceptual, and comparative approaches, analysing laws, fatwas, international standards, and ESG practices across six Islamic finance jurisdictions using descriptive qualitative analysis. Research Findings: The study finds that ESG integration in Islamic banking constitutes a legal obligation under maqasid al-shariah and the maxim ma la yatimmu al-wajib illa bihi fahuwa wajib. However, significant measurement gaps remain because Islamic social finance instruments, including zakat, waqf, and qard hasan, are excluded from global ESG metrics. National and international regulatory frameworks also fail to harmonize ESG with Sharia principles through binding standards. Therefore, the study recommends developing an Islamic Sustainable Finance framework, reforming AAOIFI (2021) and IFSB (2021) standards, issuing operational fatwas on hifz al-bi'ah, and formally recognizing Islamic social finance within global sustainability reporting standards. Conclusion: Sharia-based ESG integration requires binding regulations to strengthen sustainability, regulatory harmonization, and the global competitiveness of Islamic banking institutions. This study provides a normative foundation for global ESG-Sharia standards, strengthening Islamic finance regulation, sustainability practices, and international policy development.