Unveiling how efficiently sustainability transforms into intangible assets of financial institutions

This research delves into the relationship between environmental, social, and governance (ESG) factors and the financial value of intangible assets within financial institutions, building upon prior research that focuses on sustainable development aspects and their impact on P/E ratios. While the earlier study revealed that there is no effective transformation of E, S, and G scores into P/E ratio, this research shifts the focus to the intangible value of financial institutions. The rationale is rooted in recognising that sustainable practices contribute not only to tangible assets and profitability but also to the increasingly crucial intangible value for long-term stakeholder appreciation. The study aims to assess the efficiency of translating sustainable development outcomes, measured through ESG scores, into the valuation of intangible assets using Data Envelopment Analysis (DEA). The paper emphasises the strategic importance of intangibles and the need to understand how ESG practices influence their financial value. After applying three different evaluation models, the results found effective transformation of the selected variables in 7 of 53 financial institutions. • Research examines ESG transformation to intangible assets in financial institutions. • Adopting DEA approach to assess ESG transformation to intangible assets accurately. • Findings revealed that 7 out of 53 analysed financial institutions are effective. • Study finds ESG practices enhance long-term stakeholder value.