ESG, Asset Quality and Financial Performance in Banking: State of the Art and Future Research Directions

Abstract

The concept of Environmental, Social and Governance (ESG) is increasingly important in the banking industry due to banks’ willingness to go beyond profit maximization objectives and stakeholders’ pressure to embrace a wider sustainability perspective (Azmi et al., 2021). Furthermore, ESG risks are also attracting bank managers’ and supervisors’ attention due to their impact on financial performance and financial stability (Chiaramonte et al., 2022). In this perspective, ESG practices could play a key role in making the banking system more stable, resilient to shocks and less risky, thereby making financial intermediation processes more effective.