Do Board Characteristics Affect ESG Performance for European Banks?

The main aim of this empirical investigations is to examine the effect of board characteristics on Environmental, Social, and Governance (ESG) performance in the European banking sector during the last ten years (2013–2022). This paper examines a sample of 90 European banks and employs a Tobit regression model to explore these relationships. The results indicates that board size, board independency, board meetings, board gender diversity, return on equity and bank size have a positive effect on ESG score. However, Leverage affect ESG score negatively. By having more board members that are independent and more female on board which they meet more often will increase the bank ESG practices and performance. Due to the different interactions and backgrounds and points of view of the board members that will help in assessing and implement more ESG driven decisions. The findings provide valuable insights into the multifaceted determinants of ESG score in the European banks, underscoring the importance of both governance and financial factors in shaping sustainable practices. The research recommends that European banks prioritize the enhancement of their corporate governance mechanisms by having more independent directors, larger board size, and female board members to improve their ESG scores and practices.