ESG and financial performance
: evidence of European banks

  • Beatriz dos Santos Chaveiro (Student)

Student thesis: Master's Thesis

Abstract

In the recent years, the company’s interest in adopting a more socially responsible behaviour has increased. For that, enterprises have been investing more in ESG strategies in order to fully promote this behaviour within their stakeholders. These strategies involve three pillars: Environmental, Social, and Governance. Due to that, most scholars have started to study the relationship between ESG and Financial Performance, which results are still not linear and not concise. For researchers, companies should evaluate their Financial Performance according to three different measures: Return on Assets, Return on Equity and Tobin’s Q. Initially, the need to disclose how firms incorporate ESG practices into their business strategy was not mandatory for the banking industry. However, this paradigm has changed. There has been more legislation, developed by important mechanisms around the world, for financial enterprises to disclose how ESG is incorporated into those companies’ activities. Thereby, this dissertation specifically focuses on the European Banks with the purpose of understanding the relationship between these companies’ ESG and each ESG Pillar with Financial Performance (using the three main Financial Performance indicators mentioned above). The results showed a nonsignificant relationship between ESG and Financial Performance. However, when analysing each ESG Pillar, the Environmental Pillar showed a positive relationship with both Return on Assets and Tobin’s Q.
Date of Award24 Jan 2024
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorDiana Bonfim (Supervisor)

Keywords

  • ESG
  • ESG pillars
  • Financial performance
  • European banks

Designation

  • Mestrado em Finanças

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