<p>This study examined the impact of Environmental, Social and Governance (ESG) factors on banking-sector profitability in South Asia, focusing on Return on Assets (ROA) and Return on Equity (ROE). Using a balanced annual panel of eight South Asian countries—Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka—spanning 1999–2023, we analyzed the roles of ESG factors alongside bank-specific (capital adequacy and non-performing loans) and macroeconomic controls (gross domestic product growth and inflation). Employing a suite of econometric techniques, including Fully Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), Augmented Mean Group (AMG), Common Correlated Effects Mean Group (CCEMG), Dynamic Panel Generalized Method of Moments (GMM) (Arellano–Bond estimator), and the Fixed Effects (FE) regression model, we uncovered nuanced insights into long-run and dynamic relationships. The results revealed that social factors consistently enhance profitability, while environmental factors positively influenced operational performance of ROA but showed limited effect on ROE. Governance factors exhibited heterogeneous effects, with FMOLS indicating short-term compliance costs that may reduce profitability, whereas AMG and CCEMG highlighted cross-country heterogeneity in ESG impacts. Bank capitalization and lagged profitability were robust drivers of performance, whereas non-performing loans and inflation played a minor role. Overall, ESG integration emerges as a viable strategy for financial performance in South Asian banks. These findings suggest that policymakers should strengthen environmental regulations, promote social infrastructure, and improve governance frameworks to facilitate ESG adoption, aligning profitability with sustainable growth.</p>