The link between ESG and financial performance of the Nordic banks : AnEmpirical Analysis of the Relationship Between ESG Scores and Financial Performance of the Banks in the Nordic Region

Mohammadi, Shadi; Heydarian, Hadis
Master thesis
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https://hdl.handle.net/11250/3050609
Date
2022
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Abstract
This study examines the relationship between financial performance (FP) and ESG

performance of banks in the Nordic region. ESG-FP link is examined using fixed effect and

2SLS regressions on two samples of data obtained from Thomson Reuters' database which

spans the years 2011 to 2021. In order to measure financial performance, we employ four

different dependent variables of Tobin's Q, ROA, ROE, and SR. We discover a certain number

of significant positive links between S Score, E Score, G Score, and ESG combined Score

with the four financial performance indicators. Furthermore, by carrying out 2SLS regression

and removing endogeneity problems, we conclude causal relationships between ESG Score

and FP. Hence, not only our results highlight that ESG Score and its pillars in most cases are

positively associated with ROA, ROE, SR, and TQ but also FP can be counted as a positive

and significant predictor of ESG.