ESG relevance in credit risk of development banks

Jan Porenta and Vasja Rant

Research in International Business and Finance, 2025, vol. 76, issue C

Abstract: This paper investigates relevance of Environmental, Social, and Governance (ESG) risks in the context of banks' credit risk. Focusing on a global sample of 567 banks, including 40 development banks, we aim to discern nuances in ESG relevance scores between different bank types. Our findings highlight distinct differences between national and multilateral development banks, with ESG risk significantly influencing credit risk in the latter. Notably, social and governance factors play pivotal roles in shaping credit profiles. Development banks, at the forefront of promoting good ESG practices, face heightened exposure and risks. This paper contributes to the understanding of the evolving dynamics of ESG impact on creditworthiness.

Keywords: Development banking; Socio-economic development; ESG relevance; Credit risk; Sustainable finance (search for similar items in EconPapers)
JEL-codes: G21 G28 O19 Q56 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:riibaf:v:76:y:2025:i:c:s027553192500087x

DOI: 10.1016/j.ribaf.2025.102831

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