Sustainability and financial performance in the banking industry of the United Arab Emirates

Abstract Today's banking industry achieving sustainable profitability necessitates by integrating economic, environmental, and social factors due to pressing environmental concerns. This study investigates the impact of sustainability on financial performance in the United Arab Emirates (UAE) banking sector, using the Autoregressive Distributed Lag (ARDL) and Bootstrapping ARDL approaches on data from 2002 to 2022. The analysis revealed that economic sustainability, environmental and social sustainability exhibit a significant impact on financial performance in the short run and the long run at a (p < 0.05). 1% of economic sustainability activities increases Return on Assets (ROA) by 0.73 and Return on Equity (ROE) by 0.64. 1% of environmental sustainability activities decreases ROA by −0.28 and increases ROE by 0.35. 1% of social sustainability activities increases ROA by 0.47 and ROE by 0.42. To improve long-term profitability, this study emphasizes how crucial it is for the banking industry in the UAE to strategically integrate sustainability principles. These findings highlight the need to promote sustainability in the banking sector for environmental improvement, offering insights for UAE regulators and stimulating additional research.