The architecture of sustainable banking: Financial, institutional and risk patterns behind environmental performance

This study examines the structural determinants of Environmental Pillar (EP) performance in the international banking system by integrating advanced machine learning techniques with model interpretability tools. Using a dataset of banks from 24 countries between 2019 and 2023, the analysis identifies key financial, institutional, and risk-related drivers of environmental sustainability and explores their interaction patterns across different regions. The results show that EP performance is not the outcome of isolated or linear dynamics but emerges from a multidimensional balance between ethical governance, social responsibility, financial soundness, and operational efficiency. Environmental sustainability is particularly reinforced when strong governance structures and high levels of social engagement act jointly as institutional anchors. The positive contribution of bank size to EP is conditional on a substantial social orientation, while excessive profitability or risk exposure is associated with lower environmental performance. • Bank environmental performance (the environmental pillar) is analyzed using advanced machine learning models. • The study incorporates nonlinear interactions between financial and institutional indicators. • Sustainable profitability enhances the EP only when combined with solvency and low risk. • Social commitment and strong governance are key drivers of environmental performance. • Institutional size promotes sustainability only when anchored in an ESG-oriented framework. • Distinct regional patterns are identified, further highlighting the need for context-specific ESG regulation.