Ni escu, Dan Cos in; Ciobanu, Radu; Calin, Adina Elena; Rusu, Ana-Gab iela;
Vie escu, Eugen-Ma ian
A icle
F om cos o oppo uni y: The ole o ESG in banking
Am i ea u Economic
P o ided in Coope a ion wi h:
The Bucha es Uni e si y o Economic S udies
Sugges ed Ci a ion: Ni escu, Dan Cos in; Ciobanu, Radu; Calin, Adina Elena; Rusu, Ana-Gab iela;
Vie escu, Eugen-Ma ian (2025) : F om cos o oppo uni y: The ole o ESG in banking, Am i ea u
Economic, ISSN 2247-9104, The Bucha es Uni e si y o Economic S udies, Bucha es , Vol. 27, Iss.
68, pp. 235-252,
h ps://doi.o g/10.24818/EA/2025/68/235
This Ve sion is a ailable a :
h ps://hdl.handle.ne /10419/318593
S anda d-Nu zungsbedingungen:
Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen
Zwecken und zum P i a geb auch gespeiche und kopie we den.
Sie dü en die Dokumen e nich ü ö en liche ode komme zielle
Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich
machen, e eiben ode ande wei ig nu zen.
So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen
(insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en,
gel en abweichend on diesen Nu zungsbedingungen die in de do
genann en Lizenz gewäh en Nu zungs ech e.
Te ms o use:
Documen s in EconS o may be sa ed and copied o you pe sonal
and schola ly pu poses.
You a e no o copy documen s o public o comme cial pu poses, o
exhibi he documen s publicly, o make hem publicly a ailable on he
in e ne , o o dis ibu e o o he wise use he documen s in public.
I he documen s ha e been made a ailable unde an Open Con en
Licence (especially C ea i e Commons Licences), you may exe cise
u he usage igh s as speci ied in he indica ed licence.
h ps://c ea i ecommons.o g/licenses/by/4.0/
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 235
FROM COST TO OPPORTUNITY: THE ROLE OF ESG IN BANKING
Dan Cos in Nițescu1, Radu Ciobanu2, Adina Elena Călin3* ,
Ana-Gab iela Rusu4 and Eugen-Ma ian Vie escu5
1)2)3)4)5) Bucha es Uni e si y o Economic S udies, Romania
Please ci e his a icle as:
Nițescu, D.C., Ciobanu, R., Călin, A.E., Rusu,
A.G. and Vie escu, E.M., 2025. F om Cos o
Oppo uni y: The Role o ESG In Banking. Am i ea u
Economic, 27(68), pp. 235-252.
DOI: h ps://doi.o g/10.24818/EA/2025/68/235
A icle his o y
Recei ed: 17 Sep embe 2024
Re ised: 27 No embe 2024
Accep ed: 20 Dece mbe 2024
Abs ac
The mul i ace ed ans o ma ions ela ed o ESG ha e ecei ed many labels, and, in his
con ex , each coun y has chosen wo ds and ac ions ca e ully so as o e lec hei s a egic
in e es s. Bu om a inancial pe spec i e, ESG should answe he s a egic ques ion: is i
p o i able o no ? In eg a ion o ESG in banking equi es addi ional in es men s, digi al
ans o ma ion, and inno a ion so as o enhance he sec o ’s ole in achie ing sus ainabili y
goals. This pape aims o gi e a new pe spec i e on he p o i abili y ela ed ques ions
linked o ESG implemen a ion. Using panel eg ession echniques on a sample o 98 banks
wi h global each and agg ega ed asse s o mo e han 100 illion dolla s om he majo
inancial cen es o he wo ld, we inspec whe he ESG disclosu e and i s indi idual pilla s
ha e an impac on he inancial pe o mance o banking o ganisa ions. The esul s e lec
ha , a a holis ic le el, ESG ends o nega i ely in luencing banks` inancial pe o mance,
bu conside ing a de ailed iew on each o i s pilla s, he esul s p o ide encou aging
pe spec i es o all s akeholde s and also lessons o be applied bo h op-down and bo om-
up by banking o ganisa ions. The a icle p o ides a comp ehensi e unde s anding o he
implica ions o ESG p o i abili y in he banking sec o and emphasises he elemen s o be
conside ed in inding he balance be ween cos and oppo uni y.
Keywo ds: banking, ESG (en i onmen al, social, go e nance), inancial pe o mance
JEL Classi ica ion: C40, G15, G21, G32
* Co esponding au ho , Adina Elena Călin – e-mail: [email p o ec ed]
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons
A ibu ion License, which pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in
any medium, p o ided he o iginal wo k is p ope ly ci ed. © 2024 The Au ho (s).
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
236 Am i ea u Economic
In oduc ion
The mul iple c ises ha eme ged du ing and a e he G ea Mode a ion (acco ding o Fed
(2013), he pe iod co esponding o mid-1980s o 2007 yea s) ans o med banking
o ganisa ions in a way ha doing business is useless wi hou s ong digi al compe ences,
especially in he pos -global inancial c isis yea s. Besides he complex echnological
changes, en i onmen al, social and go e nance p inciples (ESG) ha e become an impo an
elemen bo h inside and ou side he banking sec o , p oducing s uc u al changes in he way
banks ope a e and how hey calib a e he long- e m business s a egies.
Gi en he global objec i es o mo ing owa ds a mo e sus ainable and esilien economy,
he in eg a ion o ESG by banks is e en mo e impo an , wi h banks' op imal managemen
o ESG in luencing he economy bo h di ec ly, h ough hei own isk managemen , and
indi ec ly, h ough he inancing o he economy and he ac i i ies o hei clien s.
Resea che s ha e ound ha ESG p inciples imp o e companies` pe o mance (Buallay,
2019; B oads ock e al., 2021). O he esea che s con end ha in es men in a du able
business could lead o oppo uni y cos s associa ed wi h ine icien ly alloca ed capi al
(F iedman, 1970; Auppe le e al., 1985; De inney, 2009). In indus ies wi h small p o i
ma gins, unde s anding his ela ionship be ween sus ainabili y- ela ed ac o s and i m
alue could be he di e ence be ween p o i abili y and de aul .
Unde s anding how ESG ac i i y a ec s bank alue is essen ial because e en s like he
2008 inancial c isis and he LIBOR scandal (and also he ma ch 2023 banking u moil in
US and Swi ze land) e oded con idence in inancial ins i u ions and illus a e he
complacency o bo h banks and compe en au ho i ies (De La osiè e e al., 2009; Hu ley e
al., 2014).
The aim o his s udy is o e alua e whe he he e is subs an ial e idence indica ing ha
ESG disclosu es and hei indi idual componen s ha e a majo impac on he inancial
pe o mance o banks, bo h om a inancial and a ma ke poin o iew, using panel
eg ession echnique on a sample o banks sp ead globally, du ing he pos -2015 Pa is
Ag eemen pe iod.
The esul s highligh ha all ESG pilla s a e impo an o banks` inancial soundness, bu
he social dimensions eme ge as exe cising a signi ican posi i e in luence a all analysed
le els and o a la ge pool o s akeholde s. This could be explained by he ac ha whe he
he banking o academic communi y will label he ansi ion ei he as “g een”,
“sus ainable” o “clean”, he people, communi ies and ma ke s a e hose ha , in he end,
ma e he mos and s ick he eal label.
Ou analysis con ibu es o he li e a u e using ele an a ailable da a and highligh s he
main ESG dimensions ha a ec bo h nega i ely and posi i ely he inancial pe o mance
o banks, while also p o iding di ec ions o u u e esea ch.
The pape is s uc u ed as ollows. In he nex sec ion, we p esen he li e a u e e iew and
de elop he es ed hypo heses. The da a desc ip ion and me hodology a e gi en in Sec ion
2, Sec ions 3 p esen s he es ima es and discusses he esul s, and Sec ion 4 concludes he
pape .
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 237
1. Re iew o he scien i ic li e a u e
Banks ace inc easing p essu e om s akeholde s and egula o s o espond o clima e
change by epo ing hei en i onmen al impac s and engage in ini ia i es o educe hei
g eenhouse gas emissions (Haque and N im, 2020). In esponding o his eme ging global
p essu e om s akeholde s, banks a e mo e in e es ed in ecognising clima e change
ini ia i es as means o inc ease hei epu a ion, p omo e us , c edibili y and imp o e hei
pe o mance (Schul z e al., 2013; Dinu V and Bunea M, 2019; Chia amon e e al., 2022).
Gold and Ai uwa (2022) obse ed ha boa d mee ings do no ha e an impac on bank
sus ainabili y epo ing and ecommends ha issues on sus ainabili y o be discussed in
co po a e boa d mee ings egula ly. Adu (2022) inds ha sus ainable banking ini ia i es
and inancial pe o mance a e signi ican ly mode a ed by co po a e go e nance
mechanisms and ha sus ainabili y pe o mance is mainly posi i e o banks wi h quali y
co po a e go e nance. Despi e he impo ance o boa d sus ainabili y commi ees, p io
s udies explo ing hei impac on sus ainabili y ou comes ha e been limi ed and p o ided
mixed esul s (Be one and Gomez-Mejia, 2009; Rod igue and Cho, 2013; Biswas and
Pandey, 2018; O azalin, 2020; Ionescu-Feleaga, L e al., 2021; O azalin e al., 2024).
Banks wi h highe emissions ha e mo e ola ile deposi s, leading o ola ile e u n on
asse s (ROA) and highe bank ins abili y. Banks a e expec ed o main ain high le els o
moni o ing o p o ide a us wo hy signal o asse quali y o s akeholde s. Also, he good
epu a ion is associa ed wi h long- e m highe p o i abili y and u u e c edi quali y (Ross,
2010; Bushman and Wi enbe g-Moe man, 2012). Jung e al. (2018) a gue ha he ca bon
isk o a i m has a signi ican impac on i s de aul isk due o he esul ing unce ain ies in
i s cash lows.
Webe (2014) conduc ed a s udy o explo e ESG and inancial pe o mance in China. Using
da a om 75 Chinese i ms o e he pe iod 2005-2012, he ound a posi i e impac o ESG
epo ing on s ock e u n. Deng and Cheng (2019) examined he impac o ESG ankings on
he ea nings o Chinese A-Sha e lis ed i ms using da a o e he pe iod 2011-2019 and
epo ed a posi i e connec ion. They used he ESG a ing epo s issued by wo Chinese
a ing agencies: SynTao G een Finance ESG a ing index and China Alliance o Social
Value In es men ESG a ing index. The impac was ound o be s onge o non-s a e-
owned i ms compa ed o s a e-owned i ms and o i ms in he seconda y sec o compa ed
o hose in he e ia y sec o .
Liu e al. (2021) examined he linea and non-linea impac o ESG inancial pe o mance
in he Chinese banking sec o . Using he da a o Chinese banks o e he pe iod 2009-2018,
hey epo ed a signi ican posi i e impac o go e nance sco e on e u n on equi y and
nominal in e es ma gin p o i ; howe e , he composi e ESG sco e, and en i onmen al and
social ac o s did no signi ican ly a ec e u n on asse s.
B oads ock e al. (2021) ound ha ESG pe o mance was posi i ely ela ed wi h he sho
e m cumula i e abno mal e u ns o he pe iod ollowing COVID-19 lockdown and
illus a ed he esilience o s ocks o companies wi h high ESG pe o mance du ing he
u bulen imes o ma ke c isis. Con a y o hese indings, Ruan and Liu (2021) ound a
nega i e impac o ESG anking on he pe o mance o China’s Shanghai and Shenzhen
lis ed companies. Thei inding was based on he da a o non inancial i ms o e he pe iod
2015-2019 wi h ESG a ings, da a using Tobin’s Q as a pe o mance indica o and
dependen a iable.
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
238 Am i ea u Economic
Yang e al. (2022) ocus on sus ainable de elopmen goals wi h sus ainable p ac ices
ollowed by di e en indus ies in he G7 economies om 2010 o 2018 using panel
es ima o s. Fo analysing he sus ainable p ac ices, ESG pilla s we e mainly unde
obse a ion along wi h he g een inancing, g een economic ola ili y, and clean ene gy as
key de e minan s. The indings h ough he es ima ion o panel da a con i m ha ESG
indica o s play a signi ican and posi i e ole in sus ainable p ac ices. A he same ime,
wi h he con olling e ec o en i onmen al egula ions, o eign in es men , and economic
g ow h, he s udy p o ides policy implica ions o he ecological ac i is s and o he
s akeholde s, speci ically in G7 economies while c ea ing a linkage be ween g een
economy and inancing, clean ene gy and sus ainable p ac ices.
El Khou y e al. (2021) ocus on he banking sec o o he Middle Eas , No h A ica and
Tu key egion while explo ing he ends in e u n on asse s, e u n on equi y, Tobin’s Q,
and s ock e u ns h ough ESG indica o s o 46 lis ed banks be ween 2007-2019. They also
con ol o he bank-speci ic e ec o ESG and quad a ic e m on inancial pe o mance.
The indings o hei s udy show a nonlinea associa ion be ween ESG and he ela ionship
be ween inancial pe o mance.
Chouaibi e al. (2021) e alua e ESG businesses and inancial pe o mance while
in es iga ing he media ing ole o g een inno a ion. Da a we e collec ed du ing 2005-2019
o he 115 companies in he UK and 90 companies wo king in Ge many, selec ed om
ESG index. The s udy indings con i m an inc ease in he alue o hose i ms ha ing
s ong ESG epo ing compa ed o hose wi h weak epo ing. Fu he mo e, hei indings
also p o ided some in e es ing p ac ical and academic implica ions speci ically in he
con ex o ESG epo ing o le e age some u u e g ow h oppo uni ies.
Apa om he con en ional inancial indica o s, ESG sco es a e also c i ical o e alua e
he iskiness o he i m (Ape gis e al. 2022). Many c edi a ing agencies such as
Moody’s, SandP, and Fi ch a e i ms based on hei ESG ac i i ies. O he s udies in he
banking sec o show a posi i e ole o “sus ainable” banking go e nance p ac ices in
educing he cos o deb inancing (Agnese and Giacomini 2023). Fi ms wi h be e ESG
sco es exhibi a lowe cos o equi y (Mulchandani e al. 2022) and ha e ewe capi al
cons ain s. Highe quali y and quan i y o ESG in o ma ion bene i s he capi al ma ke s by
enhancing liquidi y and lowe ing he cos o capi al o he i m (Ch is ensen e al. 2021).
P e ious esea ch on ESG c i e ia p ima ily ocuses on he co po a e pe spec i e (Bou ce ,
2020; Khanchel e al., 2023; Tsang e al., 2023). Howe e , his e iew o he li e a u e did
no iden i y any e e ences ha suppo he pe spec i e ( he social componen o ESG) o
add ess hei in ol emen in o ganisa ional managemen , as highligh ed by Ouni e al.
(2020).
S udies ha e shown ha ESG disclosu e has a signi ican posi i e impac on inancial
pe o mance in he Eu opean banking sec o , including ROA, ROE, and Tobin’s Q
(Buallay 2019). In a c oss-na ional s udy, Lopez-de-Silanes e al. (2020) looked a ESG
quali y disclosu e and ound ou ha companies who pe o m well on ESG me ics a e jus
being mo e anspa en .
Acco ding o neoclassical heo y, banks will ace nega i e ou comes, such as inc eased
expenses and in ense compe i ion, when in es ing in socially o ien a ed p ojec s (Gholami
e al., 2022). Nume ous s udies ha e also disco e ed ha , o a ious easons ha a e
mos ly connec ed o high ope a ing cos s, ESG ac i i ies nega i ely a ec bank
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 239
pe o mance (C isós omo e al. 2011; Byun 2018; Duque-G isales and Aguile a-Ca acuel
2021).
The e a e se e al hypo heses we need o ocus on in o de o analyse he impac o ESG on
banking pe o mance:
H1: The combined ESG and ESG pilla s a e impo an igge s ha can lead o inc eased
bank inancial pe o mance.
H2: The dimensions o ESG can in luence he expec ed le el o bank pe o mance.
2. Resea ch me hodology
The sus ainabili y discussion is aising he in e es o all s akeholde s in he inancial sec o ,
and banks a e pushed o wa d in he g een and clima e ansi ion owa ds a as e and mo e
sus ainable g ow h. Bu banks do no ace he same p essu e.
This pape aims o p o ide an upda ed global pe spec i e on how he ansi ion a ec s he
inancial pe o mance o banks om an ex ended inancial a ea: Uni ed S a es (US),
Eu ope and Asia Paci ic coun ies. In o de o cap u e he mul iple- ace ed ans o ma ions
o he banking sec o in hese a eas, we de eloped he sample o banks using The wo ld's
la ges banks by asse s SandP anking published on Ap il 30, 2024. Conside ing he
p e iously men ioned in e es geog aphies, we selec ed all publicly lis ed banks wi h
inancial and En i onmen al, Social and Go e nance (ESG) da a a ailable in he Re ini i
and O bis da abases. We chose he O bis da abase as i is o en used in scien i ic esea ch
o inancial da a, while he Re ini i da abase con ains one o he mos us ed and
comp ehensi e ESG da abases, wi h se e al his o ically a ailable indica o s and a clea and
anspa en me hodology.
The inal sample comp ised 98 banking o ganisa ions wi h a global each and agg ega ed
asse s o mo e han 100 illion dolla s wi h yea ly inancial and ESG indica o s a ailable
o he 2017-2022 pe iod.
Table no. 1. Desc ip i e s a is ics o key a iables
ROE
ROA
SMR
TQ
NIM
ESG
En
Soc
Go
Mean
0.12
0.01
(0.01)
0.08
0.02
7.36
9.72
8.58
8.44
Median
0.13
0.01
(0.05)
0.06
0.02
7.00
10.00
9.00
9.00
Maximum
0.47
0.06
0.73
1.11
0.22
11.00
12.00
12.00
12.00
Minimum
(0.19)
(0.01)
(0.90)
0.00
(0.00)
3.00
3.00
3.00
2.00
S d. De .
0.06
0.01
0.24
0.11
0.02
1.79
2.15
2.15
2.41
Fo each ESG pilla we used also indi idual speci ic dimensions o ensu e compa abili y
wi hin he same g oup a iables and ensu e he quali y o he esul s: En i onmen al (E) -
educ ion in esou ces, en i onmen al inno a ion, es ima ed emissions; Social (S) – p oduc
esponsibili y, wo k o ce, employees; Go e nance (G) – CEO/chai man duali y, boa d
independence, di e si y and compensa ion. The a iables used in he analysis a e p esen ed
in Table 2 and a e sepa a ed in o h ee ca ego ies:
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
240 Am i ea u Economic
Table no. 2. Va iables used in he analysis
Va iables
Labels
Explana ion
Dependen a iables
Re u n on equi y
ROE
Measu es inancial pe o mance and shows a company's
abili y o gene a e p o i s om i s sha eholde s' equi y. I
is calcula ed as ne income a e axes di ided by o al
equi y
Re u n on asse s
ROA
Measu es ope a ional pe o mance and shows he
p o i abili y o o al asse s. I is calcula ed as ne income
a e axes di ided by o al asse s
S ock ma ke e u ns
SMR
Ma ke pe o mance indica o and measu es he
p o i abili y o in es men s o e a speci ic pe iod. I is
calcula ed as ( inal p ice-ini ial p ice) di ided by ini ial
p ice
Tobin`s Q
TQ
Measu es ma ke pe o mance and is calcula ed as he
a io o ma ke capi alisa ion di ided by o al asse s
Ne in e es ma gin
NIM
Measu es he e iciency o he bank and shows he ne
e u n on he bank's ea ning asse s. I is calcula ed as ne
in e es income di ided by a e age in e es -ea ning
asse s
Independen a iables – ESG Combined and ESG pilla s
ESG Combined
ESG
Rep esen s he o e all sco e based on he epo ed
in o ma ion in he en i onmen al, social and go e nance
pilla s wi h an ESG con o e sies o e lay
En i onmen al
En
Rep esen s he sco e based on he epo ed in o ma ion
in all en i onmen al dimensions
Social
Soc
Rep esen s he in o ma ion sco e based on he epo ed
in o ma ion in all social dimensions
Co po a e go e nance
quali y
Go
Rep esen s he sco e based on he epo ed in o ma ion
in all co po a e go e nance dimensions
Independen a iables – ESG dimensions
Resou ce educ ion a ge
En _RRT
Re lec s he e iciency and capabili y o educe he use
o na u al esou ces and eplace hem wi h mo e eco-
iendly solu ions o he ope a ional p ocesses
En i onmen al inno a ion
sco e
En _IS
Re lec s he capaci y o c ea e new ma ke oppo uni ies
by educing he en i onmen al cos s o cus ome s
Es ima ed CO2 emissions
(YoY)
En _CO2
Re lec s he commi men owa d educing en i onmen al
emission in he business p ocesses
P oduc esponsibili y
sco e
Soc_PRS
P esen s he capaci y o in eg a e cus ome s` heal h and
sa e y, in eg i y and p i acy in p oduc de elopmen
Wo k o ce sco e
Soc_WS
Measu es job sa is ac ion, employees` heal h and
wo kplace sa e y, main aining di e si y and equal
oppo uni ies
Numbe o employees
(YoY)
Soc_NoE
Measu es he e olu ion o o al employees du ing a
speci ic pe iod
CEO/chai man duali y
Go _CCD
Re lec s he si ua ion in which he same indi idual
se es as bo h CEO and chai man o he boa d. We
assign 1 i bo h posi ions a e held by he same pe son
and 0 i hey a e held by di e en indi iduals
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 241
Va iables
Labels
Explana ion
Boa d gende di e si y
(%)
Go _BGD
Re lec s he % o emales on he boa d
Independen boa d
membe s (%)
Go _IBM
Re lec s he pe cen age o independen boa d membe s
Boa d membe
compensa ion (log)
Go _BMC
Re lec s he loga i hmic alue o he compensa ion
package o boa d membe s
Banking con ol a iables
Capi al adequacy a io
CAR
Measu es he abili y o abso b losses and main ain
s abili y du ing pe iods o inancial s ess using he mos
quali a i e equi y componen s. I is calcula ed as he
a io o Tie 1 Capi al a he end o he iscal yea o
To al Risk-Weigh ed Asse s
Le e age a io
LR
Measu es he ins i u ion’s exposu e o he isk o
excessi e le e age and is calcula ed as Tie 1 Capi al
di ided by To al Asse s
Loans o o al deposi s
L D
Measu es he p opo ion o a bank’s loans unded by i s
cus ome deposi s
Mac oeconomic con ol a iable
GDP g ow h
GDPg
Measu es how as an economy is g owing
We explained each inancial pe o mance a iable using he de ini ions p o ided by he
Eu opean Banking Au ho i y in i s Me hodological guidance on isk indica o s and
analysis ools issued in 2019 and upda ed in 2023. The ESG indica o s a e de ined using
he in o ma ion a ailable on he Re ini i websi e.
Banking o ganisa ions ha e known mul iple ans o ma i e in luences since he 2008
global inancial c isis, i.e. de elopmen o digi al banking, p essu e om FinTech/BigTech
companies, a i icial in elligence, mo e equen ma e ialisa ion o non- inancial isks. This
changing en i onmen poses a h ea o he inancial pe o mance o banks, which make
cons an e o s o comply wi h cus ome s` equi emen s.
As Hughes and Mes e (2013) highligh ed, he e is no consensus among esea che s
ega ding he measu emen o inancial pe o mance in banking. The e o e, we based ou
mix o dependen a iables on p e iously e iewed analyses like Azmi e al. (2021),
Buallay e al. (2020) and Adu (2022).
We de eloped an ex ended sample o independen a iables as each o hese a iables
would o m s onge links wi h di e en measu es o inancial pe o mance. Fo he G
pilla we used ou dimensions (CEO/chai man duali y, boa d gende di e si y (%),
independen boa d membe s, boa d membe compensa ion), unlike he E and S pilla s, o
which we used h ee. This di e ence is jus i ied by go e nance sho alls like hose om
2023 (Silicon Valley Bank, Sil e ga e Bank, Signa u e Bank, Fi s Republic Bank o US
ma ke and C edi Suisse Eu opean ma ke ), by he ac ha go e nance has a c i ical ole
in se ing he one o ans o ma ion wi hin he banking o ganisa ion and ha e en a e he
ha d lessons o mul iple unce ain ies, go e nance and con ol issues a e s ill mos
nume ous in supe ision epo s (Fed, 2024).
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
242 Am i ea u Economic
To u he inspec he pe o mance-ESG ela ionship, we included in ou esea ch wo ypes
o con ol a iables. Bank speci ic con ol a iables we e used o con ol o in e nal bank
cha ac e is ics ha could mislead he ela ionships and ensu e ha esul s e lec he e ec s
o he independen a iables a he han he in insic ac o s. The coun y speci ic con ol
a iables we e used gi en he in e /in a- egional di e ences in e ms economic and
echnological de elopmen , in ellec ual p ope y egimes, and mac oeconomic speci ici ies.
To analyse he ela ionship be ween banks` inancial pe o mance and ESG indica o s, we
used panel eg essions, which a e op imal o cap u ing bo h c oss-sec ional and ime-se ies
a ia ions, allowing o a mo e igo ous ep esen a ion o unobse ed he e ogenei y ac oss
mul iple en i ies and o e a longe pe iod o ime. The panel eg ession, ei he wi h ixed o
andom e ec s, is equen ly used in scien i ic li e a u e, especially on co po a e
pe o mance in banking. Bal agi (2009) conside s ha panel da a gi e be e esul s,
dec ease collinea i y among a iables and inc ease e iciency. Hence, panel da a p o ide a
be e con ol o he impac o unobse ed he e ogenei y (Hsiao, 2022).
yi =αi+βXi +ui (1)
whe e:
yi – he dependen a iable o uni i in pe iod ,
α – he in e cep ,
β – he ec o o coe icien s o he independen a iables,
Xi – he ec o o independen a iables o uni i and pe iod ,
ui – he e o e m.
Panel eg essions wi h andom e ec s pe mi he assessmen o wo sou ces o di e si y:
be ween companies o he same yea , and wi hin each company o e ime (Bell and Jones,
2015). On he o he hand, panel eg essions wi h ixed e ec s allow he examina ion o he
wi hin-uni a ia ion, assuming ha he in e cep is no a andom alue, meaning each
company is signi ican ly di e en om ano he in e ms o hei base le els o he
dependen a iable. To decide which model is mo e applicable, we used h ee es s o
model speci ica ion in panel da a: he Lag ange mul iplie ( o check i he model needs
e ec s and o e i y i hey should be applied on c oss-sec ion o ime se ies dimensions),
he Hausman es ( o choose be ween ixed and andom e ec s) and he likelihood a io ( o
de e mine whe he ixed e ec s a e needed). The panel eg ession es s indica ed ha c oss
sec ion ixed e ec mus be applied on ou models.
3. Resul s and discussion
The co ela ion be ween a iables is p esen ed o ESG pilla s and he ela ed dimensions
in Tables 3.1 and 3.2.
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 249
The main limi a ion in conduc ing his esea ch is da a a ailabili y, which is he eason why
he numbe o pe iods is only 6 yea s. I is known ha he e is a gap o minimum one yea
be ween he la es inancial and ESG da a a ailable. Also, we had o educe ou sample due
o he ac ha no so many companies ha e publicly a ailable ESG da a.
In e ms o u he esea ch, expanding he sample, adding dummy a iables o obse e he
e ec s o geog aphical a eas o economic c ises, es ing o he a iables as well as including
in e ac ion a iables in eg ession models may ep esen some di ec ions o he
de elopmen o he li e a u e on his opic.
Re e ences
Adu, D.A., 2022. Sus ainable banking ini ia i es, en i onmen al disclosu e and inancial
pe o mance: The mode a ing impac o co po a e go e nance mechanisms. Business
S a egy and he En i onmen , 31(5), 2365-2399.
Agnese, P. and Giacomini, E., 2023. Bank’s unding cos s: Do ESG ac o s eally ma e ?
Finance Resea ch Le e s, [e-jou nal] 51, a icle no. 103437. h ps://doi.o g/10.1016/
j. l.2022.103437.
Ape gis, N., Pou inas, T. and An onopoulos, A., 2022. ESG sco es and cos o deb . Ene gy
Economics, [e-jou nal] 112, a icle no. 106186. h ps://doi.o g/10.1016/
j.eneco.2022.106186.
Auppe le, K.E., Ca oll, A.B. and Ha ield, J.D., 1985. An empi ical examina ion o he
ela ionship be ween co po a e social esponsibili y and p o i abili y. Academy o
Managemen Jou nal, [e-jou nal] 28(2), pp.446-463. h ps://doi.o g/10.2307/256210.
Azmi, W., Hassan, M.K., Hous on, R. and Ka im, M.S., 2021. ESG ac i i ies and banking
pe o mance: In e na ional e idence om eme ging economies. Jou nal o
In e na ional Financial Ma ke s, Ins i u ions and Money, [e-jou nal] 70, a icle no.
101277. h ps://doi.o g/10.1016/j.in in.2020.101277.
Bal agi, B.H., 2009. Econome ic Analysis o Panel Da a: A Companion o Econome ic
Analysis o Panel Da a. John Wiley and Sons Inco po a ed.
Bell, A., and Jones, K., 2015. Explaining ixed e ec s: Random e ec s modeling o ime-
se ies c oss-sec ional and panel da a. Poli ical Science Resea ch and Me hods, 3(1),
133-153.
Be one, P. and Gomez-Mejia, L.R., 2009. En i onmen al Pe o mance and Execu i e
Compensa ion: An In eg a ed Agency-Ins i u ional Pe spec i e. Academy o
Managemen Jou nal, [e-jou nal] 52(1), pp.103-126. h ps://doi.o g/10.5465/
amj.2009.36461950.
Biswas, P.K., Mansi, M. and Pandey, R., 2018. Boa d composi ion, sus ainabili y
commi ee and co po a e social and en i onmen al pe o mance in Aus alia. Paci ic
Accoun ing Re iew, [e-jou nal] 30(4), pp.517-540. h ps://doi.o g/10.1108/PAR-12-
2017-0107.
Bou ce , C., 2020. Empi ical de e minan s o enewable ene gy deploymen : A sys ema ic
li e a u e e iew. Ene gy Economics, [e-jou nal] 85, a icle no. 104563.
h ps://doi.o g/10.1016/j.eneco.2019.104563.
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
250 Am i ea u Economic
B oads ock, D.C., Chan, K., Cheng, L.T.W. and Wang, X., 2021. The ole o ESG
pe o mance du ing imes o inancial c isis: E idence om COVID-19 in
China. Finance Resea ch Le e s, [e-jou nal] 38, a icle no. 101716.
h ps://doi.o g/10.1016/j. l.2020.101716.
Buallay, A., 2019. Sus ainabili y epo ing and i m’s pe o mance: Compa a i e s udy
be ween manu ac u ing and banking sec o s. In e na ional Jou nal o P oduc i i y and
Pe o mance Managemen , [e-jou nal] 69(3), pp.431-445. h ps://doi.o g/10.1108/
IJPPM-10-2018-0371.
Buallay, A., Fadel, S.M., Al-Ajmi, J.Y. and Saudaga an, S., 2020. Sus ainabili y epo ing
and pe o mance o MENA banks: is he e a ade-o ? Measu ing Business
Excellence, [e-jou nal] 24(2), pp.197-221. h ps://doi.o g/10.1108/MBE-09-2018-0078.
Bushman, R.M. and Wi enbe g‐Moe man, R., 2012. The Role o Bank Repu a ion in
“Ce i ying” Fu u e Pe o mance Implica ions o Bo owe s’ Accoun ing
Numbe s. Jou nal o Accoun ing Resea ch, [e-jou nal] 50(4), pp.883-930.
h ps://doi.o g/10.1111/j.1475-679X.2012.00455.x.
Byun, H.-Y., 2018. Impac o ESG ac o s on i m alue in Ko ea. Jou nal o in e na ional
ade and comme ce, 14(5).
Chia amon e, L., D eassi, A., Gi a done, C. and Pise à, S., 2022. Do ESG s a egies
enhance bank s abili y du ing inancial u moil? E idence om Eu ope. The Eu opean
Jou nal o Finance, [e-jou nal] 28(12), 1173-1211.
h ps://doi.o g/10.1080/1351847X.2021.1964556.
Chouaibi, S., Chouaibi, J. and Rossi, M., 2021. ESG and co po a e inancial pe o mance:
he media ing ole o g een inno a ion: UK common law e sus Ge many ci il
law. Eu oMed Jou nal o Business, [e-jou nal] 17(1), pp.46-71.
h ps://doi.o g/10.1108/EMJB-09-2020-0101.
Ch is ensen, H.B., Hail, L. and Leuz, C., 2021. Manda o y CSR and sus ainabili y
epo ing: economic analysis and li e a u e e iew. Re iew o Accoun ing S udies,
[e-jou nal] 26(3), pp.1176-1248. h ps://doi.o g/10.1007/s11142-021-09609-5.
C isós omo, V.L., de Souza F ei e, F. and De Vasconcellos, F.C., 2011. Co po a e social
esponsibili y, i m alue and inancial pe o mance in B azil. Social esponsibili y
jou nal, [e-jou nal] 7(2), 295-309. h ps://doi.o g/10.1108/17471111111141549.
De La osiè e, J., Balce owicz, L., Issing, O., Mase a, R., McCa hy, C., Nybe g, L.,
Ruding, O., 2009. Repo o he high-le el g oup on inancial supe ision in he EU.
Eu opean Commission, B ussels.
Deng, X. and Cheng, X., 2019. Can ESG Indices Imp o e he En e p ises’ S ock Ma ke
Pe o mance? An Empi ical S udy om China. Sus ainabili y, [e-jou nal] 11(17),
a icle no. 4765. h ps://doi.o g/10.3390/su11174765.
De inney, T.M., 2009. Is he socially esponsible co po a ion a my h? The good, he bad,
and he ugly o co po a e social esponsibili y. The Academy o Managemen
Pe spec i es, 23(2), pp. 44-56.
Dinu, V. and Bunea, M., 2019. The co po a e social esponsibili y o he Romanian
banking sys em, Economics and Managemen , Vol. 22, No. 4, pp 119-133,
h ps://doi.o g/10.15240/ ul/001/2019-4-008
Am i ea u Economic ecommends
AE
Vol. 27 • No. 68 • Feb ua y 2025 251
Duque-G isales, E. and Aguile a-Ca acuel, J., 2021. En i onmen al, Social and Go e nance
(ESG) Sco es and Financial Pe o mance o Mul ila inas: Mode a ing E ec s o
Geog aphic In e na ional Di e si ica ion and Financial Slack. Jou nal o Business
E hics, [e-jou nal] 168(2), pp.315-334. h ps://doi.o g/10.1007/s10551-019-04177-w.
El Khou y, R., Nas allah, N. and Ala eeni, B., 2023. ESG and inancial pe o mance o
banks in he MENAT egion: conca i y–con exi y pa e ns. Jou nal o Sus ainable
Finance and In es men , [e-jou nal] 13(1), pp.406-430.
h ps://doi.o g/10.1080/20430795.2021.1929807.
Fede al Rese e, 2013. The G ea Mode a ion. [online]. A ailable a :
h ps://www. ede al ese ehis o y.o g/essays/g ea -mode a ion> [Accessed 11 Oc obe
2024].
Fede al Rese e, 2024. Supe ision and Regula ion Repo . [online]. A ailable a : <
h ps://www. ede al ese e.go /publica ions/ iles/202411-supe ision-and- egula ion-
epo .pd > [Accessed 17 Sep embe 2024].
F iedman, M., 1970. A Theo e ical F amewo k o Mone a y Analysis. Jou nal o Poli ical
Economy, [e-jou nal] 78(2), pp.193-238.
Gholami, A., Sands, J. and Rahman, H.U., 2022. En i onmen al, Social and Go e nance
Disclosu e and Value Gene a ion: Is he Financial Indus y Di e en ? Sus ainabili y,
[e-jou nal] 14(5), a icle no. 2647. h ps://doi.o g/10.3390/su14052647.
Gold, N.O. and Ai uwa, H.O., 2022. Boa d Mee ing and Sus ainabili y Repo ing o Banks
in Nige ia. Cope nican Jou nal o Finance and Accoun ing, [e-jou nal] 11(3), 49-67.
h ps://doi.o g/10.12775/CJFA.2022.013.
Haque, F. and N im, C.G., 2020. Execu i e compensa ion, sus ainable compensa ion
policy, ca bon pe o mance and ma ke alue. B i ish Jou nal o Managemen ,
[e-jou nal] 31(3), 525-546. h ps://doi.o g/10.1111/1467-8551.12395.
Hsiao, C., 2022. Analysis o panel da a. Camb idge uni e si y p ess.
Hughes, J.P. and Mes e , L.J., 2013. Measu ing he Pe o mance o Banks: Theo y,
P ac ice, E idence, and Some Policy Implica ions. SSRN Elec onic Jou nal.
[e-jou nal] h ps://doi.o g/10.2139/ss n.2306003.
Hu ley, R., Gong, X. and Waqa , A., 2014. Unde s anding he loss o us in la ge
banks. In e na ional Jou nal o Bank Ma ke ing, [e-jou nal] 32(5), pp.348-366.
h ps://doi.o g/10.1108/IJBM-01-2014-0003.
Ionescu F.L., Ionescu, B.S. and Bunea, M., 2021. Explo ing The Romanian S uden s'
In en ion o Use he In e ne o Things Fo Sus ainable Educa ion, Economic
Compu a ion And Economic Cybe ne ics S udies And Resea ch, Volume 55, Issue 2,
pp. 109-123, h ps://doi.o g/10.24818/ 18423264/55.2.21.07
Jung, J., He bohn, K. and Cla kson, P., 2018. Ca bon Risk, Ca bon Risk Awa eness and he
Cos o Deb Financing. Jou nal o Business E hics, [e-jou nal] 150(4), pp.1151-1171.
h ps://doi.o g/10.1007/s10551-016-3207-6.
Khanchel, I., Lassoued, N. and Bacca , I., 2023. Sus ainabili y and i m pe o mance: he
ole o en i onmen al, social and go e nance disclosu e and g een
inno a ion. Managemen Decision, [e-jou nal] 61(9), pp.2720-2739.
h ps://doi.o g/10.1108/MD-09-2021-1252.
AE
F om Cos o Oppo uni y: The Role o ESG in Banking
252 Am i ea u Economic
Liu, Y., Saleem, S., Shabbi , R., Shabbi , M.S., I shad, A. and Khan, S., 2021. The
ela ionship be ween co po a e social esponsibili y and inancial pe o mance: a
mode a e ole o in ech echnology. En i onmen al Science and Pollu ion Resea ch,
[e-jou nal] 28(16), pp.20174-20187. h ps://doi.o g/10.1007/s11356-020-11822-9.
Lopez-de-Silanes, F., McCahe y, J.A. and Pudschedl, P.C., 2020. Esg Pe o mance and
Disclosu e: A C oss-Coun y Analysis. Singapo e Jou nal o Legal S udies, [e-jou nal]
pp.217-241.
Mulchandani, K., Mulchandani, K., Iye , G. and Lona e, A., 2022. Do Equi y In es o s
Ca e abou En i onmen , Social and Go e nance (ESG) Disclosu e Pe o mance?
E idence om India. Global Business Re iew, [e-jou nal] 23(6), pp.1336-1352.
h ps://doi.o g/10.1177/09721509221129910.
O azalin, N., 2020. Do boa d sus ainabili y commi ees con ibu e o co po a e
en i onmen al and social pe o mance? The media ing ole o co po a e social
esponsibili y s a egy. Business S a egy and he En i onmen , [e-jou nal] 29(1),
pp.140-153. h ps://doi.o g/10.1002/bse.2354.
O azalin, N.S., N im, C.G. and Malagila, J.K., 2024. Boa d Sus ainabili y Commi ees,
Clima e Change Ini ia i es, Ca bon Pe o mance, and Ma ke Value. B i ish Jou nal o
Managemen , [e-jou nal] 35(1), pp.295-320. h ps://doi.o g/10.1111/1467-8551.12715.
Ouni, Z., Ben Mansou , J. and A aoui, S., 2020. Boa d/Execu i e Gende Di e si y and
Fi m Financial Pe o mance in Canada: The Media ing Role o En i onmen al, Social,
and Go e nance (ESG) O ien a ion. Sus ainabili y, [e-jou nal] 12(20), a icle no. 8386.
h ps://doi.o g/10.3390/su12208386.
Rod igue, M., Magnan, M. and Cho, C.H., 2013. Is En i onmen al Go e nance Subs an i e
o Symbolic? An Empi ical In es iga ion. Jou nal o Business E hics, [e-jou nal]
114(1), pp.107-129. h ps://doi.o g/10.1007/s10551-012-1331-5.
Ross, D.G., 2010. The “Dominan Bank E ec :” How High Lende Repu a ion A ec s he
In o ma ion Con en and Te ms o Bank Loans. Re iew o Financial S udies,
[e-jou nal] 23(7), pp.2730-2756. h ps://doi.o g/10.1093/ s/hhp117.
Ruan, L. and Liu, H., 2021. En i onmen al, Social, Go e nance Ac i i ies and Fi m
Pe o mance: E idence om China. Sus ainabili y, [e-jou nal] 13(2), a icle no. 767.
h ps://doi.o g/10.3390/su13020767.
Schul z, F., Cas elló, I. and Mo sing, M., 2013. The cons uc ion o co po a e social
esponsibili y in ne wo k socie ies: A communica ion iew. Jou nal o business
e hics, [e-jou nal] 115, 681-692. h ps://doi.o g/10.1007/s10551-013-1826-8.
Tsang, Y.P., Fan, Y. and Feng, Z.P., 2023. B idging he gap: Building en i onmen al,
social and go e nance capabili ies in small and medium logis ics companies. Jou nal
o En i onmen al Managemen , [e-jou nal] 338, a icle no. 117758.
h ps://doi.o g/10.1016/j.jen man.2023.117758.
Yang, Q., Du, Q., Razzaq, A. and Shang, Y., 2022. How ola ili y in g een inancing, clean
ene gy, and g een economic p ac ices de i e sus ainable pe o mance h ough ESG
indica o s? A sec o al s udy o G7 coun ies. Resou ces Policy, [e-jou nal] 75, a icle
no. 102526. h ps://doi.o g/10.1016/j. esou pol.2021.102526.
Webe , O., 2014. En i onmen al, Social and Go e nance Repo ing in China. Business
S a egy and he En i onmen , [e-jou nal] 23(5), pp.303-317.
h ps://doi.o g/10.1002/bse.1785.
