Banks’ ESG disclosure: a new scoring model

Internal and external pressures are pushing the financial system towards an increasing socially and environmentally responsible orientation. But how to measure the actual degree of sustainability of a financial institution, by relying on the environmental, social, and corporate governance (ESG) framework? This study proposes a new indicator – the BESGI score (Banks’ Environmental, Social, Governance and Indirect Impacts), aimed at measuring banks’ direct and indirect impacts through financing and investing. We offer both a theoretical and an empirical contribution. First, a novel scoring model for measuring sustainability impacts is presented, with indicators validated by practitioners, aggregated using the “Multidimensional Synthesis of Indicators’ method, and based on a theoretical framework rooted in organisational facades and legitimacy, institutional and signaling theory. Moreover, we apply the model to a wide sample of European banks and analyse the determinants of the score. Our results show relevant opportunities for improvement towards real sustainability, especially concerning social measures and the disclosure of indirect impacts. The determinants having the greatest effect are the size of the institutions (larger banks perform better), the characteristics of the financial system (the greater the penetration of banks and their territorial capillarity, the higher the BESGI indicator), and the engagement of public opinion on ethical finance and ESG topics (BESGI score is higher in countries with more attention to accountability).