Definition of ESG variables
| Variable | Description measure | ESG predictor |
|---|---|---|
| ESG performance, ESG pillars and ESG dimensions (source: Refinitiv) | ||
| ESG performance (ESG_perf) | Weighted average of the ESG scores and ESG controversies (captured from global media sources) | It is a combined indicator of ESG pillars (i.e. the environmental pillar (ENV), the social pillar (SOC), the governance pillar (GOV)), discounted for ESG controversies |
| ESG Pillar | Description Measure | ESG Dimensions |
| Environmental (ENV) | Environmental performance measures a company's capacity to reduce environmental emissions, to efficiently use natural resources in the production processes and to support the research and development of eco-efficient products and services | It is based on three dimensions: ENV_Ru (Resource use efficiency), ENV_Em (Emission and waste reduction), ENV_In (Environmental innovation) ENV_Ru = bank's efficiency in reducing the use of materials, energy or water and capacity to find more eco-efficient solutions for the business processes ENV_Em = bank's commitment and effectiveness in reducing environmental emissions and waste in operational activities ENV_In = bank's capacity to reduce the environmental burdens and costs for its clients and to create new opportunities for eco-designed products and services |
| Social (SOC) | Social performance measures a company's capacity to generate trust and loyalty in its workforce, to respect the fundamental conventions of human rights, to be a good citizen, to protect public health, to respect business ethics and to create value-added products and services | It is based on four dimensions: SOC_Wf (Workforce), SOC_Hr (Human rights), SOC_Com (Community), SOC_Prd (Product responsibility) SOC_Wf = bank's effectiveness towards job satisfaction, safe and healthy workplace, while developing both equal and diversity opportunity SOC_Hr = bank's effectiveness in respecting fundamental human rights conventions SOC_Com = bank's commitment to being a good citizen, respecting business ethics and protecting public health SOC_Prd = bank's capacity to offer high quality products and services, regarding the customers' health and Safety, data privacy and integrity |
| Governance (GOV) | Corporate governance performance measures a company's capacity to act in the best interest of its shareholders through management systems and processes (structure and functions of the board of directors, compensation policy, etc.) | It combines three dimensions: GOV_Mo (Management and oversight), GOV_Shr (Shareholders rights), GOV_Csr (CSR strategy) GOV_Mo = bank's commitment and effectiveness in following corporate governance principles GOV_Shr = bank's effectiveness in treating its shareholders in an equal manner GOV_Csr = bank's way to incorporate social and environmental dimensions in its decision-making processes |
| Variable | Description measure | ESG predictor |
|---|---|---|
| ESG performance, ESG pillars and ESG dimensions (source: Refinitiv) | ||
| ESG performance (ESG_perf) | Weighted average of the ESG scores and ESG controversies (captured from global media sources) | It is a combined indicator of ESG pillars (i.e. the environmental pillar (ENV), the social pillar (SOC), the governance pillar (GOV)), discounted for ESG controversies |
| ESG Pillar | Description Measure | ESG Dimensions |
| Environmental (ENV) | Environmental performance measures a company's capacity to reduce environmental emissions, to efficiently use natural resources in the production processes and to support the research and development of eco-efficient products and services | It is based on three dimensions: ENV_Ru (Resource use efficiency), ENV_Em (Emission and waste reduction), ENV_In (Environmental innovation) |
| Social (SOC) | Social performance measures a company's capacity to generate trust and loyalty in its workforce, to respect the fundamental conventions of human rights, to be a good citizen, to protect public health, to respect business ethics and to create value-added products and services | It is based on four dimensions: SOC_Wf (Workforce), SOC_Hr (Human rights), SOC_Com (Community), SOC_Prd (Product responsibility) |
| Governance (GOV) | Corporate governance performance measures a company's capacity to act in the best interest of its shareholders through management systems and processes (structure and functions of the board of directors, compensation policy, etc.) | It combines three dimensions: GOV_Mo (Management and oversight), GOV_Shr (Shareholders rights), GOV_Csr (CSR strategy) |
Source(s): Table by authors
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