The purpose of this study is to analyze the determinants of the performance of listed European banks, focusing on the global ESG index and its components.
A sample of 56 listed banks from 18 European countries was analyzed from 2011 to 2021 using the panel data methodology with the Generalized Method of Moments (GMM) system.
The results of this study show that the global ESG index negatively affects performance metrics, return on assets, return on equity and Tobin’s Q, but positively impacts net interest margin. When examining the individual ESG components, only the environmental pillar (ENV) positively influences all performance metrics, indicating stakeholders value green investments for competitive advantage and business valuation. The social component, involving equality and social well-being, is not valued similarly by stakeholders.
This research fills a gap by addressing the diverse impacts of ESG components on different performance measures, offering practical implications for managers, investors and regulators in the European banking sector. Moreover, the results show non-linear relationships between performance and sustainability measures, reinforcing the usefulness of including them in this study.
