Impact of Green Banking and Environmental CSR Practices on Sustainable Performance in the Banking Industry: The Mediating Effect of Green Finance

Sustainable performance has become a critical benchmark for banks, particularly in emerging economies facing environmental and regulatory pressures. This study aims to explore how green finance mediates the associations among green banking activities (GBA), environmental corporate social responsibility (ECSR), and the sustainable performance of commercial banks in Bangladesh, thereby filling gaps in emerging markets. The structured questionnaires were administered to 250 bank employees via convenience sampling. SmartPLS-4.0 with confirmatory factor analysis, bootstrapping (5,000 resamples), and mediation tests was used to analyze a reflective higher-order PLS-SEM. The results indicate that green banking activities (GBA) have a significant positive impact on green finance (β=0.26, p=0.004), which in turn influences sustainable performance (β=0.56, p<0.001). There is no direct relationship between ECSR and green finance (β=0.11, p=0.08), but the effect of ECSR on the sustainable performance relationship is mediated by green finance (indirect β=0.06, t=1.79, p=0.07). Green finance partly mediates the relationship between GBA and sustainable performance (indirect β = 0.14, t = 2.92, p = 0.004), accounting for 30.58% of the total effect. These findings suggest that banks should focus on integrating green finance into GBA and aligning ECSR with financing to promote sustainable performance. The research provides significant insights for bankers and policymakers aiming to improve sustainable financial structures in climate-sensitive developing nations.