Impact of Material ESG SASB Factors on the Cost of Debt in Banking

This working paper (right now in the research proposal stage) examines the listed material sustainability standards for the commercial banking industry provided by the Sustainability Accounting Standards Board (SASB) and attempts to quantify them. The first initial step will be to develop normalized scores for each of these factors through the provided operating metrics in SASB's Bloomberg Report. In the quantification process, Principal Component Analysis will be used on these normalized scores to determine which factor is driving the variance, and in a sense, driving the ESG impact. After determining those driving factors, a multivariate regression will be used to compare these factors to the cost of debt of US banking firms with assets over 100 million. The goal and significance of this paper are to create a metric for banks. It will allow them to see that improving there sustainability will lead to a lower cost of debt, but on a more fundamental level, to see which specific SASB factors to focus to drive the cost of debt down in the most efficient way.