Green Economy and Credit Quality in the European Banking Industry: What are the Opportunities for Sustainability?

Elena Bruno (), Giuseppina Iacoviello () and Mavillonio Maria Saveria ()
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Elena Bruno: University of Pisa
Giuseppina Iacoviello: University of Pisa
Mavillonio Maria Saveria: University of Pisa

Chapter 6 in Business for Sustainability, Volume I, 2023, pp 117-140 from Palgrave Macmillan

Abstract: Abstract The chapter combines environmental, social and governance rating (ESGr), credit risk (CR), and financial performance (FP) of a sample of European banks in an empirical analysis. We analyzed the dynamics of ESGr and CR using the credit default swaps (CDS) spread. The first finding shows that ESGr enhances the mitigation of CR; therefore, the quality of green credit asset (GCA) and FP could be improved. This result is achieved using the regression technique: the GCA increase can reduce the non-performing loans and improve the solvency ratio. The study can be considered the first empirical attempt on the banking sector in UE to discover the variables that might have a positive correlation of CR, ESGr and FP, providing new perspectives on the financial sustainability in the banking sector.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:pal:pscchp:978-3-031-37361-9_6

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DOI: 10.1007/978-3-031-37361-9_6

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