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ESG Innovation in the Financial Industry

In: Adapting to Change

Author

Listed:
  • Egidio Palmieri

    (University of Udine)

  • Enrico Fioravante Geretto

    (University of Udine)

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.

Suggested Citation

  • Egidio Palmieri & Enrico Fioravante Geretto, 2023. "ESG Innovation in the Financial Industry," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Adapting to Change, chapter 0, pages 63-95, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-031-50265-1_3
    DOI: 10.1007/978-3-031-50265-1_3
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    More about this item

    Keywords

    Sustainable finance; ESG performance impact; Risk management; Credit policies; Capital access;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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