Bank Business Models and ESG Performance: Evidence from European Banks

Published: 3/23/2026

Carlo Bellavite Pellegrini (Catholic University of the Sacred Heart),Peter Cincinelli (University of Bergamo),Andrea Roncella (Catholic University of the Sacred Heart)

GRINS THEMATIC AREAS

Sustainable Finance

RESOURCES

Main attachment

In this paper, we study the relationship between banks’ business models and the Environmental, Social and Governance (ESG) performance. While previous studies mainly examine how business models influence financial variables, little is known about the relationship between ESG performance and banks’ financial configurations.

We use a threshold regression model (Hansen, 1999) to identify optimal threshold levels in the business models of a sample of 80 European listed banks from 2006 - 2021. We find that higher ESG scores are positively related to stronger capital buffers and greater reliance on deposit-based funding. Moreover, ESG performance is linked to more traditional and stable income structures, with lower dependence on high-risk, market-based activities. These findings suggest that ESG integration contributes to financial resilience and provides policy insights for incorporating sustainability factors into prudential regulation and risk assessment frameworks.

KEYWORDS

BankingBusiness modelBank performanceESGThreshold analysis

JEL CODE

G21,G28,Q56

AKNOWLEDGEMENTS

Special thanks to the Editor, Sabri Boubaker, for giving us the opportunity to prepare a new version of the paper, and four anonymous Referees for their very helpful comments and suggestions, which greatly helped to improve the content and the presentation of the paper. We wish to thank the participants in the Finance Engineering Banking Society conference (20-22 June 2024, Paris School of Business, Paris, France), in particular Amangeldi Kenjegaliev, Andrea Calef and Ariel Gu, as hosts and organisers of the UEA School of Economics’ seminar series, the International Conference in Banking and Financial Studies (5-6 September 2024, University of Catania, Sicily, Italy), in particular Danilo V. Mascia for his insightful comments. Funding sources: this research was conducted while Peter Cincinelli was receiving financial support from the European Union (NextGenerationEU, framework Growing Resilient, INclusive and Sustainable project - GRINS PE00000018- CUP F83C22001720001). T

CITE THIS WORK

Pellegrini, Carlo Bellavite, et al. "Bank Business Models and ESG Performance: Evidence from European Banks." Working paper (2026).

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