The Impact of Sustainable Finance on Financial Risk Management of Conventional Banks in Pakistan

Abstract

This study examines the impact of sustainable finance on financial risk management in conventional banks in Pakistan. Utilizing a comprehensive methodological framework, the research explores how integrating environmental, social, and governance (ESG) criteria can influence operational, credit, market, and liquidity risks. Empirical data collected from various banks over multiple years were analyzed using panel data regression models. The results indicate that sustainable finance significantly reduce financial risks, enhance transparency, and improve overall financial performance. These findings highlight the strategic value of ESG integration for risk mitigation and long-term stability in the banking sector, providing practical recommendations for banks and policymakers to advance sustainable finance in emerging markets.