Journal of Credit Risk

Nonbanking financial institutions and sustainability issues: empirical evidence on the impact of environmental, social and governance scores on market performance

Claudia Cannas, Laura Pellegrini and Andrea Roncella

  • We highlight how ESG scores relate to market performance of Non-Banking Financial Institutions (NBFIs).
  • 6,225 firm level observations from 415 companies from 2006 to 2020 are assessed.
  • A positive and significant link between ESG scores and market-to-book ratios is found, suggesting companies which pay attention to ESG issues are rewarded in the long term.
  • Finally, we analyze the role of the ESG Controversies Score on the financial performance of NBFIs underlining a negative and significant relation.

This study highlights how environmental, social and governance (ESG) scores relate to the market performance of nonbanking financial institutions (NBFIs), using a sample for the period 2006–20 composed of 415 international listed financial institutions. To show whether firms oriented toward long-term sustainability achieve not only reputational but also financial benefits, we run a panel regression based on the Tobin model.We find that the market-to-book ratio is positively affected by increases in ESG scores, with stronger evidence for environmental and governance drivers. Finally, we analyze the role of the ESG controversies score on the financial performance of NBFIs, finding a negative and significant relation. This study represents a novel contribution to this field of research in two respects: first, the specific financial sectors investigated are diversified financials, insurance and real estate investment trusts, rather than traditional financial intermediaries (banks are excluded); second, the time horizon analyzed contains many important economic and financial events and much interesting evidence.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to View our subscription options

You need to sign in to use this feature. If you don’t have a account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here