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Using E from ESG in Systemic Risk Measurement

In: Creating Value and Improving Financial Performance

Author

Listed:
  • Ewa Dziwok

    (University of Economics in Katowice)

  • Marta Anita Karaś

    (Wroclaw University of Economics and Business)

  • Michał Stachura

    (Jan Kochanowski University)

Abstract

The chapter presents a new method that quantifies environmental risk in a systemic risk measurement, based on ESG scores. The authors extract the environmental factor (E-factor) from each bank's score and apply a conditional sensitivity function basing the impact of environmental risk exposure on individual characteristics of banks and their systemic risk levels. The method is demonstrated on data stylized for a large sample of systemically important European banks for years 2007 to 2022. This exercise shows that the impact of the environmental risk factor is bigger in turbulent periods and for more fragile banks. A geographic variability between Western and Central-Eastern Europe is also observed. The solution is applicable to many different systemic risk measures and environmental scores.

Suggested Citation

  • Ewa Dziwok & Marta Anita Karaś & Michał Stachura, 2023. "Using E from ESG in Systemic Risk Measurement," Palgrave Macmillan Studies in Banking and Financial Institutions, in: Paul Wachtel & Giovanni Ferri & Ewa Miklaszewska (ed.), Creating Value and Improving Financial Performance, chapter 0, pages 85-118, Palgrave Macmillan.
    • Handle: RePEc:pal:pmschp:978-3-031-24876-4_4
    DOI: 10.1007/978-3-031-24876-4_4
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