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From Obstacles To New Opportunities: Exploring Profitability In The Banking Industry Amid Sustainability And The Green Transition

Author

Listed:
  • Petra Jilkova

    (Department of Banking and Insurance, Faculty of Finance and Accounting, University of Economics in Prague, The Czech Republic)

  • Ladislava Knihova

    (Anglo-American University in Prague, The School of Business, The Czech Republic)

  • Natalie Heroldova

    (Czech Technical University in Prague, Masaryk Institute of Advanced Studies, The Czech Republic)

Abstract

This study examines the relationship between sustainability and the financial performance of European banks, focusing on their Return on Average Assets (ROAA) and Return on Average Equity (ROAE). Using panel regression analysis on data from 2018 to 2022, the findings reveal a negative correlation between sustainability factors and short-term profitability, suggesting that sustainability-related investments may initially lead to higher costs and lower returns. However, the results also indicate a potential association between sustainability engagement and long-term financial resilience, though the exact causal mechanisms remain subject to further research. The study contributes to the ongoing debate on the financial implications of sustainability in the banking sector and highlights the need for further econometric analysis to assess the long-term effects of sustainable investments.

Suggested Citation

Handle: RePEc:wsz:fiq000:v:21:y:2025:i:3:id:1210
DOI: 10.2478/fiqf-2025-0017
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