Banking Sector and ESG Scoring: European Union Overview

Abstract

Purpose: This chapter presents the topics related to environmental, social and governanace (ESG) scoring, with particular emphasis on ESG ratings as a tool for benchmarking the company. The banking sector was selected for the study and comparisons were made against the banking sector in the European Union (EU).

Methodology: Firstly, a literature review and a bibliometric analysis of publications related to ESG scoring were conducted for this chapter. Secondly, the LSEG database were employed and further studied in environmental, social, and governance. The time scope of the research is 2017–2022. Using descriptive statistic tools and comparative studies of scoring, we perform an analysis for all three ESG areas and the value of the total scoring for banks from EU countries.

Findings: ESG scoring for all dimensions in the banking sector in EU countries shows good relative ESG performance and above average degree of transparency in reporting material ESG data publicly. The highest rank for total ESG score has banks from France, Portugal, and Spain (score A). Banks from Sweden, Slovenia, Poland, the Netherlands, Italy, Ireland, Hungary, Greece, Germany, Finland, the Czech Republic, and Austria assessed the scoring, which was situated above the median values, in the third quartile (score B). The last group with satisfactory relative ESG performance (score C) are banks from Slovakia, Denmark, Cyprus, and Belgium. The studies also allow us to formulate the following conclusions: the average and the median values for all ESG disclosure areas are higher in the old EU countries in all ESG dimensions. Moreover, other statistical measures (Q1, Q3) are also higher in banks from the old EU countries.

Implications: Important both for banks’ insiders and stakeholders as it provides a measurement and benchmarking tool. The data can be used as well for further analysis of the banking sector.

Limitations: Comparable ESG scoring among EU countries. Nevertheless, not all banks and countries were included in further analysis because of a lack of data. Unfortunately, the comparative analysis covers only 19 out of 27 counties. The time scope of the research is limited to six years due to regulatory limitations.

Future Research: The relationship between ESG scores and the performance of banks (e.g., return on assets, return on equity, market value).

Citation

Czaja-Cieszyńska, H., Kordela, D. and Garanti, Z. (2024), "Banking Sector and ESG Scoring: European Union Overview", Grima, S., Maditinos, D., Noja, G.G., Stankevičienė, J., Tarczynska-Luniewska, M. and Thalassinos, E. (Ed.) Exploring ESG Challenges and Opportunities: Navigating Towards a Better Future (Contemporary Studies in Economic and Financial Analysis, Vol. 116), Emerald Publishing Limited, Leeds, pp. 175-195. https://doi.org/10.1108/S1569-375920240000116010