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ESG relevance in credit risk of development banks

Author

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  • Porenta, Jan
  • Rant, Vasja

Abstract

This paper investigates relevance of Environmental, Social, and Governance (ESG) risks in the context of banks' credit risk. Focusing on a global sample of 567 banks, including 40 development banks, we aim to discern nuances in ESG relevance scores between different bank types. Our findings highlight distinct differences between national and multilateral development banks, with ESG risk significantly influencing credit risk in the latter. Notably, social and governance factors play pivotal roles in shaping credit profiles. Development banks, at the forefront of promoting good ESG practices, face heightened exposure and risks. This paper contributes to the understanding of the evolving dynamics of ESG impact on creditworthiness.

Suggested Citation

  • Porenta, Jan & Rant, Vasja, 2025. "ESG relevance in credit risk of development banks," Research in International Business and Finance, Elsevier, vol. 76(C).
    • Handle: RePEc:eee:riibaf:v:76:y:2025:i:c:s027553192500087x
    DOI: 10.1016/j.ribaf.2025.102831
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    More about this item

    Keywords

    Development banking; Socio-economic development; ESG relevance; Credit risk; Sustainable finance;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • 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

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