Keywords
Financial Performance
ESG Practices
Banking Sector
How to Cite
Abstract
The study examines the impact of environmental, social, and governance practices on the performance of banking institutions listed on the NSE. The ESG score was collected for 2021 and 2022 from CRISIL, and Financial Data was collected from Prowess IQ. ROA, ROE, and Tobin's Q were used as proxies for the firm's operational, financial, and market performance. Tobin's Q, ROA, and ROE correlate highly with ESG, environment, social, and governance scores. Using fixed-effect panel regression, it has been observed that the aggregate ESG scores have been found to have a statistically significant positive impact on ROA but a statistically insignificant negative impact on ROE and Tobin's Q. However, if measured individually, the governance score and Capital Adequacy Ratio positively affect ROA, demonstrating that strengthening the governance and capital adequacy can improve a bank's operational performance. The study concludes that India's banking sector is far from adopting sustainable strategies to boost financial and market performance. The findings and implications are important to investors, banking executives, and policymakers.
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