ESG activities and financial performance in banking industry

• Thesis title in Czech: ESG aktivity a finanční výkonnost v bankovnictví
• Thesis title in English: ESG activities and financial performance in banking industry
• Academic year of topic announcement: 2023/2024
• Thesis type: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: doc. PhDr. Ing. et Ing. Petr Jakubík, Ph.D., Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 14.06.2024
• Date of assignment: 14.06.2024
• Venue of defence: IES
• Date of electronic submission: 27.07.2025
• Opponents: doc. PhDr. Martin Gregor, Ph.D.

References

Oyegunle, A., & Weber, O. (2015). Development of Sustainability and Green Banking Regulations Existing Codes and Practices. CIGI Papers, 65, 1–12.

Zadek, S. and N. Robins. 2015. Aligning the Financial System with Sustainable Development. Geneva, Switzerland: UNEP

Witzel, M., & Bhargava, N. (2023). AI-Related Risk: The Merits of an ESG-Based Approach to Oversight. Centre for International Governance Innovation.

Jo, Hoje, et al. “Corporate Environmental Responsibility and Firm Performance in the Financial Services Sector.” Journal of Business Ethics, vol. 131, no. 2, 2015, pp. 257–84

Amri, Fethi, et al. “ECONOMIC GROWTH AND ENVIRONMENTAL DEGRADATION: THE ROLE OF SECTORAL DYNAMICS AND SOCIAL SUSTAINABILITY IN MENA COUNTRIES.”

Preliminary scope of work in English

Proposed Topic:
The implementation of Environmental and Social regulation and the consequent financial sector performance: An analysis between sustainability and economic growth


Preliminary scope of work:
Research question and motivation

Research question: To what extent does Environmental & Social (E&S) regulation implementation affect financial sector performance in emerging economies and can these factors promote consequent economic development?

Motivation:
The addition of Environmental & Social (E&S) initiatives and regulations remains a relatively recent inclusion to the broader scope of the global financial sector. With a focus of sustainability at the forefront, largely driven by the need to mitigate risks related to environmental and social issues such as climate change, E&S implementation retains its respective importance. Stakeholders within numerous financial industries are also incorporating expectations involving E&S into their overall expectation of corporate performance (Jo, Kim, et al. 2015). The banking industry holds the potential to be the driving force of change, as 45% of all banks in 39 countries monitored by the Financial Stability Board (FSB) hold the largest share of the financial sector's assets, $139 USD million (Zadek & Robins, 2015).

Previous findings have attributed lower income and less developed countries to enforce sustainability oriented measures and regulation within their financial sectors more heavily as compared to industrialized ones (Oyegunle & Weber 2015). For example, the addition of China’s green credit policy aimed to oversee loans given to industries harming the environment and altered interest rates depending on specific environmental metrics (Weber 2016). Subsequently, data from a study on this policy showed that sustainability score and financial performance share a positive correlation (Weber 2016). Moreover, this relationship appears to indicate a positive trend and implications can be derived for policymakers and corporations regarding the future of sustainable financing.

Within my thesis, I plan to test first, my hypothesis that E&S implementation and sustainability scores improve financial sector performance in emerging economies. Then, I will test my second hypothesis that the resulting financial performance influenced by E&S regulation correlates with overall economic growth of the country. Both of these hypotheses aim to quantify my research question and answer it thoroughly.


Contribution
Prior research attributes a conclusive relationship among financial sector performance, relative E&S initiatives, and subsequent E&S scores. My contribution to existing research would aim to explore the relationship more in depth by additionally analyzing how this correlation corresponds with a country’s comprehensive economic growth. These variables interplay with one another; findings from my work can be used to gain deeper insight into the linking between these. Furthermore, with developing economies being the focal point of my thesis, my conclusions can dictate whether E&S measures should be actualized to stimulate economic advancements, and the implications that arise for stakeholders and policymakers alike.


Methodology
To begin my methodology process, I will need to assemble which countries will analyze . My thesis will focus solely on emerging economies, so I will choose country data that will fit this description. Then, I will use data from the WorldBank, Moody, Reuters, and International Monetary Fund, to run a regression on bank performance (return on assets, return on equity, and non-performing loans); my goal will be to include explanatory variables combined with the existence of dummy variables corresponding with E&S initiative presence. To continue, I will further develop the model by running another regression of economic growth and factor in the E&S bank performance. I will utilize these models to draw conclusions and analyze the interaction of these components.

Outline
- Abstract
- Introduction
E&S relevance in the financial sector
E&S related risks
E&S and AI
The relevance of E&S regulation and risks to emerging economies
- Literature Review
Summary of past findings
Research gaps
- Methodology
Hypotheses
Data used and from which countries
Reasoning behind countries chosen
Variables assessed
Regression
- Results
Comparative analysis of my findings
Implications for future
- Conclusion
Summary of findings
Limitations in the study