"A Comparative Analysis of Performance of “ESG” Investments with Non-” ESG” Investments in European Banks"

Abstract

European banks with and without Environmental, Social, and Governance (ESG) principles were compared in terms of performance. The intention was to assess the prospective impacts of "ESG" investments on risk management, durability, and "financial performance." A quantitative methodology was applied using panel data from 40 publicly traded European banks between 2010 and 2024. Financial measures like “return on equity” (ROE), “return on assets” (ROA), and “non-performing loans” (NPL) were contrasted with sustainability metrics like green financing ratios and “ESG” ratings and their environmental, social, and governance sub-dimensions. To guarantee empirical robustness, multiple regression models, correlation tests, and descriptive statistics were used. The findings confirmed that “ESG”-focused banks were more resilient during economic disruptions like the COVID-19 pandemic and demonstrated that financial results and “ESG” integration were positively correlated, specifically in profitability and credit risk management. The effects differed among the “ESG” pillars, though, with social and environmental aspects demonstrating more robust financial ties than governance. The results emphasize how “ESG” investments support sustainable growth, regulatory compliance, and bank stability. Reliance on secondary data and disparities in provider ratings are among the drawbacks. To get more comprehensive insights, future studies should extend the analysis to non-listed banks and regional variations within Europe.