ESG Innovation in the Financial Industry

Egidio Palmieri and Enrico Fioravante Geretto ()
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Enrico Fioravante Geretto: University of Udine

Chapter Chapter 3 in Adapting to Change, 2023, pp 63-95 from Palgrave Macmillan

Abstract: Abstract This chapter analyses the integration of Environmental, Social, and Governance (ESG) factors in the financial sector. It highlights the link between credit policies and ESG practices in shaping sustainable finance. The chapter examines how ESG factors influence firm risk and profitability, noting that better ESG performance can lead to reduced risk and more favourable loan conditions. The impact of ESG scores on the bank-firm relationship is also explored, revealing that strong ESG performance may result in better lending terms and improved access to capital. Despite these findings, there is a noted gap in research on the market reactions to banks’ ESG performance. The chapter concludes by discussing the European Banking Authority's guidelines on incorporating ESG factors in banking, emphasizing the need for sustainable and risk-sensitive lending practices in the financial industry.

Keywords: Sustainable finance; ESG performance impact; Risk management; Credit policies; Capital access (search for similar items in EconPapers)
JEL-codes: G11 G21 G30 G32 Q56 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pmschp:978-3-031-50265-1_3

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DOI: 10.1007/978-3-031-50265-1_3

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