ESG Variations Across Banking Loan Types: Evidence From European Listed Banks

Paulo Morais Francisco and Eduardo Couto

Economic Notes, 2026, vol. 55, issue 2

Abstract: Building on social‐capital theory and transaction‐cost theory, we examine whether European banks' rated ESG performance varies systematically with the composition of their loan portfolios. Merging Refinitiv ESG scores with Orbis Bank Focus loan‐book data for 51 EU‐listed banks over 2005–2022, we estimate pooled OLS, random‐effects, fixed‐effects, lagged‐variable, and dynamic System‐GMM specifications. The evidence points to one robust regularity and two more qualified patterns. First, banks with higher mortgage‐loan shares tend to have lower ESG ratings: a one‐standard‐deviation increase in mortgage intensity is associated with an approximately three‐point lower composite ESG score and up to five points lower environmental pillar score, and the negative mortgage association remains visible in the dynamic System‐GMM models. Second, consumer‐loan intensity is positively associated with ESG ratings in random‐effects, fixed‐effects, and lagged fixed‐effects specifications, particularly for the environmental and social pillars, but this association is not statistically significant in the dynamic System‐GMM models. Third, corporate‐loan exposure shows no stable relationship with overall ESG ratings. We interpret these patterns as consistent with a trust‐intensity mechanism: ESG commitments and lending technologies appear to align differently across collateral‐rich, standardised lending and softer‐information retail activities.

Date: 2026
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