Banks’ financial performance: A study of environmental, social, and governance dimensions

In recent years, environmental, social, and governance (ESG) issues have become of great interest, especially in the banking sector. Banks are integrating ESG dimensions into their strategies because ESG is expected to impact banks’ financial performance (Menicucci & Paolucci, 2022). This study contributes to exploring the impacts of ESG on financial performance in the banking sector by shedding light on the relationship between ESG awareness, ESG practices, and banks’ financial performance. The study also examines the mediating role of ESG practices in the relationship between ESG awareness and banking performance. Using SmartPLS 4 software, the findings confirm the positive relationship between ESG awareness, ESG practices, and banking performance across accounting measures (earnings before interest and taxes [EBIT], return on assets [ROA], net interest margin [NIM]), and also assert the mediating role of ESG practices in the relationship between ESG awareness and banking performance (Wu et al., 2024). The results support the idea that ESG adoption may increase banking performance and suggest the implementation of the ESG strategy to achieve sustainable development.