Beyond Profitability: ESG Performance and Financial Resilience of Banks in Romania and Poland

This study examines the relationship between ESG performance and financial performance and resilience in the banking sector, using a sample of systemically important banking institutions in Romania and Poland for the period 2020–2024. The study aims to assess the extent to which ESG performance contributes to improving financial performance and strengthening the financial resilience of banking institutions operating in these two emerging economies in Central and Eastern Europe. The research employs an empirical framework based on correlation analysis, panel regression models (Fixed Effects and Random Effects), selected on the basis of the Hausman test, with robust standard errors, as well as a robustness analysis using ESG variables lagged by one year. Financial performance is assessed using the Return on Assets (ROA) and Return on Equity (ROE) indicators, whilst financial resilience is analysed using the Capital Adequacy Ratio (CAR), Liquidity Coverage Ratio (LCR), Non-Performing Loans (NPLs) and Cost of Risk (CoR). ESG performance is examined both through the aggregate ESG score and through its individual environmental, social and governance components. The results highlight that ESG performance does not show statistically significant associations with traditional indicators of financial performance. Instead, the analysis reveals differentiated associations between the ESG components and indicators of financial resilience, with the social dimension being associated with credit risk indicators (NPL and CoR), whilst the environmental and governance components do not show significant effects in the estimated models. The study’s contribution lies in the simultaneous analysis of financial performance and financial resilience using a panel framework applied to banks in Romania and Poland, as well as in highlighting the heterogeneous nature of the relationship between ESG components and the various dimensions of financial resilience. The results complement the literature on the banking sector in Central and Eastern Europe and offer relevant implications for banking institutions, investors and regulators, without implying causal relationships between the variables analysed.