Commercial banks that prioritise sustainability outperform those which do not, according to a new research report issued by the Global Alliance for Banking on Values (GABV) and produced with the support of the European Investment Bank and Deloitte.
Recruited by the GABV, KKS Advisors analysed data from 100 of the largest commercial banks, scored on their pursuit of ‘material’ environmental, social and governance (ESG) issues over a ten-year period. Applying the materiality approach of the Sustainability Accounting Standards Board (SASB), the analysis showed that those who consistently scored well on material ESG issues, also delivered higher than average financial returns.
The banks’ ESG performance was measured on a number of issues, both material and immaterial. The SASB identifies material ESG issues as those that are likely to impact the financial condition or performance of a company. These included factors such as access and affordability, labour practices, diversity and inclusion, and data security.
Immaterial issues are those that the SASB does not consider to significantly impact the financial condition or operating performance of commercial banks.
The findings could prove useful to investors when making capital allocation decisions, showing that a bank’s performance on ESG factors may be an indication of their future financial performance.
The full report can be downloaded here
Do sustainable banks outperform