Does the sovereign environmental, social, and governance sustainability activities jeopardize the banking sector's stability: Evidence from the Arab economies

The results uncover that the relationship between combined sovereign environmental, social, and governance (ESG) and banking sector's stability is a non-linear and inverted U-shaped in GCC economies, and nationals' sustainability practices after exceeding a turning point of 0.228 reduce stability. Furthermore, the inverted U-shaped relationship between individual sovereign ESG and stability reveals that the banking sectors reap the benefits of countries engaging in sustainability practices if the ESG activities scores do not exceed turning points of 0.345, 0.232, and 0.424, respectively. The findings suggest policymakers find an optimal level through a balanced approach when investing toward achieving sustainability goals.