Articlehybrid2021

Banks and environmental, social and governance drivers: Follow the market or the authorities?

Mario La Torre · Sabrina Leo · Ida Claudia Panetta

151 citations0/0 files storedCorporate Social Responsibility and Environmental Management

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Corporate Social Responsibility Reporting Islamic Finance and Banking Studies Sustainable Finance and Green Bonds

Abstract

Abstract This paper goes beyond the relationship between a bank ESG performance (ESGP) and corporate financial performance (CFP). Here, the link between ESG factors and financial benchmarks is analysed to verify whether banks may find in the market reaction sufficient stimuli (higher CFP) to adopt ESG conduct spontaneously. Using panel estimation methods on European banks listed in STOXX Europe 600, between 2008 and 2019, this paper tests the relationship between ESGP and CFP considering different dimensions of financial performance at once, both accounted‐based (ROA and ROE) and market‐based (Capitalisation to Book Value, Tobin's Q). Besides, we employ VBM (EVA Spread) not previously considered. The main findings support the current approach of banking authorities, focusing on bank ESG risks, more than ESG opportunities, in order to “force” banks into adopting a new ESG business model, at this early stage of transition to sustainability.

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References

2010Strategic management a stakeholder approach 1978Specification Tests in Econometrics 1995Toward a New Conception of the Environment-Competitiveness Relationship 1995The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications 1991The pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders 1995A Stakeholder Framework for Analyzing and Evaluating Corporate Social Performance 1997THE CORPORATE SOCIAL PERFORMANCE-FINANCIAL PERFORMANCE LINK 1995The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications

Cited by

2022Environmental, Social, and Governance Integration into the Business Model: Literature Review and Research Agenda 2023The impact of ESG factors on financial efficiency: An empirical analysis for the selection of sustainable firm portfolios 2022Impact of environmental, social and governance disclosure on dividend policy: What is the role of corporate governance? Evidence from an emerging market 2025The role of green finance in attaining environmental sustainability within a country's ESG performance 2023Relationship between ESG and corporate financial performance in the energy sector: empirical evidence from European companies

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