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Climate risk, ESG performance, and ESG sentiment in US commercial banks

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  • Erhemjamts, Otgontsetseg
  • Huang, Kershen
  • Tehranian, Hassan

Abstract

We measure US commercial banks' exposure to and materiality of physical climate risk by examining branch-level data. Our location-specific climate risk measure is pos- itively associated with banks' ESG performance and negatively associated with stake- holders' sentiment regarding ESG issues. Furthermore, banks that experience climate risk shocks, as proxied by NOAA billion-dollar disasters, improve ESG performance and receive positive ESG sentiment accordingly compared with matched banks. While negative sentiment due to climate risk exposure is associated with worsened financial performance, stronger ESG engagement mitigates this adverse effect.

Suggested Citation

  • Erhemjamts, Otgontsetseg & Huang, Kershen & Tehranian, Hassan, 2024. "Climate risk, ESG performance, and ESG sentiment in US commercial banks," Global Finance Journal, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:glofin:v:59:y:2024:i:c:s1044028323001199
    DOI: 10.1016/j.gfj.2023.100924
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    Cited by:

    1. Massimo Arnone & Angelo Leogrande, 2024. "The Sustainability Of The Factoring Chain In Europe In The Light Of The Integration Of Esg Factors," Working Papers hal-04629337, HAL.

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    More about this item

    Keywords

    Commercial banks; Climate risk; ESG performance; And ESG sentiment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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