September 28, 2025

Banking on Green: Assessing Financial Market ESG Performance in European Financial Institutions

AHAlexandra HorobeţBucharest University of Economic Studies BRBirjees RahatExcelia Business School LBLucian BelaşcuLucian Blaga University of Sibiu

Key Points

Higher ESG scores correlate with reduced financial results, indicating potential higher operational costs.
Aligning with the MSCI ESG benchmark leads to improved ROA and ROE, highlighting sustainability benefits.
The analysis covers 280 banks across 30 European countries from 2014 to 2023, using quantitative methods.
Findings advance understanding of how sustainability reshapes investment decisions and risk in banking.

Abstract

This study examines sustainability commitment integration into financial performance within European financial institutions, using a panel data regression analysis across 280 listed banks from 30 European countries (2014–2023). Empirical findings reveal mixed relationships. While simple ESG disclosure does not significantly impact performance, higher ESG scores correlate with reduced financial results, suggesting increased operational costs associated with sustainability reporting. Interestingly, aligning with the MSCI ESG benchmark positively impacts ROE and ROA, indicating benefits from industry-leading sustainability practices. This research advances understanding of how sustainability considerations reshape investment decisions and risk assessments in banking.

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