Abstract: As inclusive and sustainable development becomes a global policy priority, understanding the nexus between financial access and banking system stability under the influence of emerging environmental, social, and governance (ESG) standards is of paramount importance. This study examines the impact of financial inclusion (FI) on bank stability (BS) and the moderating role of ESG factors across 19 listed commercial banks in Vietnam from 2010 to 2023. Utilizing panel data with the Fixed Effects Model (FEM), Driscoll–Kraay standard errors, and the Within–Between model, the results indicate that financial inclusion does not exert a uniform impact across the entire sample but depends heavily on bank size. Specifically, FI significantly enhances stability in large-scale banks due to their technological advantages and brand reputation, whereas it creates certain pressures for smaller banks. Notably, when decomposing ESG pillars, the study finds that the Environmental (E) factor plays the most powerful and positive moderating role (p < 0. 01), amplifying the positive impact of financial inclusion on bank stability through a synergistic mechanism involving green credit and climate risk management. Conversely, the moderating effects of the Social (S) and Governance (G) pillars remain limited, as their implementation in Vietnam continues to be largely symbolic and incurs high short-term compliance costs. This research contributes empirical evidence regarding the asymmetric impact of FI and the value of integrating ESG into sustainable financial development pathways. Accordingly, the authors propose recommendations for refining the ESG legal framework integrated with credit risk management and financial inclusion strategies for the Vietnamese banking system.
Phuoc et al. (Tue,) studied this question.