Using E from ESG in Systemic Risk Measurement

Ewa Dziwok (), Marta Anita Karaś () and Michał Stachura
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Ewa Dziwok: University of Economics in Katowice
Marta Anita Karaś: Wroclaw University of Economics and Business

Chapter Chapter 4 in Creating Value and Improving Financial Performance, 2023, pp 85-118 from Palgrave Macmillan

Abstract: Abstract The chapter presents a new method that quantifies environmental risk in a systemic risk measurement, based on ESG scores. The authors extract the environmental factor (E-factor) from each bank's score and apply a conditional sensitivity function basing the impact of environmental risk exposure on individual characteristics of banks and their systemic risk levels. The method is demonstrated on data stylized for a large sample of systemically important European banks for years 2007 to 2022. This exercise shows that the impact of the environmental risk factor is bigger in turbulent periods and for more fragile banks. A geographic variability between Western and Central-Eastern Europe is also observed. The solution is applicable to many different systemic risk measures and environmental scores.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-031-24876-4_4

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DOI: 10.1007/978-3-031-24876-4_4

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