ESG uncertainties and valuation implications: Evidence from the EU banking sector

IF 6.3 2区经济学 Q1 BUSINESS, FINANCE

Research in International Business and Finance Pub Date : 2025-03-17 DOI:10.1016/j.ribaf.2025.102872

Jie Dou , Nawazish Mirza , Muhammad Umar , Alexandra Horobet

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Abstract

This study investigates the impact of financed emissions and ESG controversies on the valuation of banking firms within the European Union. As climate-related risks become increasingly critical to financial markets, banks face pressures to manage their contributions to climate change and adhere to evolving Environmental, Social, and Governance (ESG) standards. Using panel data between 2018 and 2021 of banks across twenty-seven countries, we assess the influence of financed emissions and ESG controversy scores on two key valuation metrics of residual income and price-to-book ratios. Our findings reveal that banks with lower ESG controversies tend to achieve higher market valuations. Regarding climate change, the banks with higher financed emissions face declining valuations. Our results highlight banks' strategic importance in minimizing their carbon footprint and mitigating ESG-related risks to safeguard long-term value. The research has significant actionable implications. We contribute to the ongoing dialogue on sustainable finance, offering insights for banks, regulators, and investors seeking to navigate the challenges of a transitioning financial sector.

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来源期刊

Research in International Business and Finance BUSINESS, FINANCE-

CiteScore

11.20

自引率

9.20%

发文量

240

期刊介绍： Research in International Business and Finance (RIBAF) seeks to consolidate its position as a premier scholarly vehicle of academic finance. The Journal publishes high quality, insightful, well-written papers that explore current and new issues in international finance. Papers that foster dialogue, innovation, and intellectual risk-taking in financial studies; as well as shed light on the interaction between finance and broader societal concerns are particularly appreciated. The Journal welcomes submissions that seek to expand the boundaries of academic finance and otherwise challenge the discipline. Papers studying finance using a variety of methodologies; as well as interdisciplinary studies will be considered for publication. Papers that examine topical issues using extensive international data sets are welcome. Single-country studies can also be considered for publication provided that they develop novel methodological and theoretical approaches or fall within the Journal''s priority themes. It is especially important that single-country studies communicate to the reader why the particular chosen country is especially relevant to the issue being investigated. [...] The scope of topics that are most interesting to RIBAF readers include the following: -Financial markets and institutions -Financial practices and sustainability -The impact of national culture on finance -The impact of formal and informal institutions on finance -Privatizations, public financing, and nonprofit issues in finance -Interdisciplinary financial studies -Finance and international development -International financial crises and regulation -Financialization studies -International financial integration and architecture -Behavioral aspects in finance -Consumer finance -Methodologies and conceptualization issues related to finance