Analysis

Do sustainable banks outperform?

Driving value creation through ESG practices

A collaborative research effort by the European Investment Bank (EIB), the Global Alliance for Banking on Values (GABV), Deloitte and KKS Advisors finds commercial banks with good performance on material environmental, social and governance (ESG) issues outperform those with poor performance on the same issues.

Explore content

A growing number of companies around the world have voluntarily adopted and implemented a broad range of sustainability practices as a response to emerging challenges and stakeholder expectations across the environmental, social and governance (ESG) space.

It is undeniable that change is afoot when it comes to the purpose of the corporation and banks are pivotal to this change. As transmitters of finance, their willingness to apply values-based judgements to the investments they support will profoundly impact both the pace of change and the destination. But is such activity about fulfilling a societal expectation or could it be financially profitable for the banks and their investors as well? What if values-based banking could benefit a bank and the society it operates within?

Do sustainable banks outperform? Driving value creation through ESG practices is a collaborative piece of analysis by the EIB, the GABV, Deloitte and KKS Advisors of the world’s largest 100 commercial banks that builds on research by Professor George Serafeim and others.

The report explores the link between a bank’s financial performance and its focus on material sustainability issues as defined by the Sustainability Accounting Standards Board (SASB) and finds that commercial banks with good performance on material ESG issues outperform banks with poor performance on the same issues.

Key findings

  • A strategic focus on ESG, can lead to financial outperformance in across industries (prior research) and specifically for banks.
  • Banks with good performance on material ESG issues outperform banks with bad performance on the same issues by more than 2%.
  • Investing in immaterial ESG issues appears to be correlated with slightly worse financial performance.
  • Material ESG issues are promising signals for informing investment decisions based on ESG performance.

Top vs bottom 20 scoring material ESG banks’ portfolio financial performances 2007-2017*

Did you find this useful?