Impact of ESG on the Financial Performance of Banks of BRICS

Abstract

Given an increasing interest in environmental, social, and governance (also known as ESG) and their financial performance, we researched at banks from BRICS countries such as China, Russia, Brazil, India, and South Africa and aim to address the research gap in study. while examining banking sector business, and the scarcity of studies investigating emerging companies and the effect from ESG pillars on financial performance. The aggregate ESG score, as well as its components, are conducted to analyze their effect on the financial performance while, accounting-based method such as return on assets (ROA) and return on equity (ROE) is factored into an equation. To inspect our hypothesis, we utilized regression (linear) having panel data from the Thomson Reuters database to evaluate data from 161 listed banks of BRICS countries from 2016 to 2020. Our study provide evidence of ESG performance companies having positive correlation with financial performance of banks. We also investigated at the environmental, governance, and social pillars directly in relation to the financial performance and discovered a positive correlation well with control variables of size and GDP.