Is There a Trade‐Off Between Sustainable Development Goals Achievement and Banking Profitability? Evidence From Combined Non‐Parametric Methods

ABSTRACT The present study endeavors to investigate whether there exists a trade‐off between banking profitability stemming from credit expansion activities and endeavors aligned with sustainable development goals (SDGs) in Vietnam. Spanning from 2000 to 2022, the study utilizes banking profitability data (ROA) retrieved from the WDI database, and SDG data, encompassing SD2, SD3, SD4, SD6, SD7, SD12, and SD13, sourced from SDG. Employing two combined non‐parametric methodologies, Quantile‐on‐Quantile regression and Wavelet coherence models, the research unveils compelling insights. Notably, concerning SDG2, SDG4, SDG6, SDG7, and SDG12, the support extended by banks toward these objectives indicates both positive and negative associations over the study duration. A robust negative correlation is discerned between SDG12 and ROA, implying that financing activities and projects aligned with SDG12 in Vietnam may entail disproportionately high costs relative to the profits accrued. Conversely, SDG13 manifests a positive correlation across quantiles, suggesting that banks in Vietnam endorsing endeavors aimed at addressing climate change could bolster their profitability. Moreover, intervals of positive correlation between ROA and SDGs (excluding SDG12) are notably pronounced in the 2015–2016 timeframe, following the SDG summit, underscoring the importance of SD‐focused initiatives and sending clear signals to economic actors, including banks, to rally behind these objectives.