ESG Risk in Financial Decisions of Financial Markets and Companies

Zioło, Magdalena; Spoz, Anna

doi:10.1007/978-3-031-07398-4_4

Cited by 3 publications

(1 citation statement)

References 14 publications

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“…Despite this, the indicated approaches do not exhaust the possibilities of defining ESG risk. There is an immense number of recognised and unrecognised causative factors (Marcinkowska, 2022;KPMG, 2021;PwC, 2022;EBA, 2021;Zioło & Spoz, 2022), causing the ESG risk is a category that remains the subject of numerous controversies and debates. In this situation, it seems important to treat the ESG risk spectacularly, distinguishing it from the uncertainty accompanying the idea of sustainable development.…”

Section: Uncertainty and Esg Risk Of Credit Institutionsmentioning

confidence: 99%

Exposure to the ESG risk of the Polish banking sector

Pyka,

Nocoń

2024

EiS

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The main aim of the article is to explore changes taking place in ESG risk management in the Polish banking sector. The following research methods were used: in-depth literature studies, desk research methods, questionnaire survey methods, case study analyses, and observation and synthesis methods. The article verified the adopted research hypothesis, stating that knowledge and awareness of the importance of ESG risk in commercial banks in Poland increased, which is reflected in practical activities related to their bank risk management systems. The research that was conducted showed that Polish banks are increasingly aware of the ESG risk and the need for their inclusion in risk management processes. This inclusion takes place through various channels. However, an important aspect of this system is the assessment of banks' exposure to ESG risk. Commercial banks in Poland use mainly qualitative methods, although they also recognise quantitative ones to measure the scale of ESG risk taken.

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Section: Uncertainty and Esg Risk Of Credit Institutionsmentioning

confidence: 99%

Exposure to the ESG risk of the Polish banking sector

Pyka,

Nocoń

2024

EiS

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Firm-level climate change risk and adoption of ESG practices: a machine learning prediction

Khan,

Zein Alabdeen,

Anupam

2024

BPMJ

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PurposeBy combining the notion of prospect theory with advanced machine learning algorithms, this study aims to predict whether financial institutions (FIs) adopt a reactive stance when they perceive climate change as a risk, consequently leading to the adoption of environmental, social and governance (ESG) practices to avoid this risk. Prospect theory assumes that decision-makers react quickly when decisions are framed as a risk or threat rather than as an opportunity.Design/methodology/approachWe used a sample of 168 FIs across 27 countries and seven regions over the period 2003–2020. To conduct our empirical investigation, we compared the prediction accuracy of various machine learning algorithms.FindingsOur findings suggest that out of 12 machine learning algorithms, AdaBoost, Gradient Boosting and XGBoost have the most precision in predicting whether FIs react to climate change risk in adopting ESG practices. This study also tested the overall climate change risk and risks associated with physical, opportunity and regulatory shocks of climate change. We observed that risks associated with physical and regulatory shocks significantly impact the adoption of ESG practices, supporting prospect theory predictions.Practical implicationsThe insights of this study provide important implications for policymakers. Specifically, policymakers must take into account the risk posed by climate change in the corporate decision-making process, as it directly influences a firm’s adoption of corporate actions (ESG practices).Originality/valueTo the best of our knowledge, this is the first study to investigate the firm-level climate change risk and adoption of ESG practices from a prospect theory perspective using novel machine learning algorithms.

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ESG risk management in banks – towards its measurement

Nocoń

2024

EiS

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The concept of sustainable development has been gaining importance and increasing society's awareness of the need to stop climate change, inequality, social exclusion, and inappropriate corporate practices. Banks increasingly integrate ESG objectives into their business activity. However, it is associated with their exposure to a new type of risk – the ESG risk. ESG risk management for banking institutions has now become not only a fashion and trend but an obligation that they have to fulfil. The main aim of the article is to identify ESG risk and methods of quantification, as well as to assess the exposure to ESG risk of commercial banks in Poland. That’s why the paper presents an in-depth literature review in the field of ESG concept and ESG risk in banks. Then, it describes the adopted methodology of the empirical research. The third section covers a presentation of the obtained results, which include the analysis of ESG risk exposure of the largest banks in the world and selected commercial banks in Poland, mainly based on the volume of the carbon footprint they generate and finally, ESG risk ratings for Polish banks. The following research methods were used in the article: literature studies, case study analysis, observation methods and synthesis methods. The empirical research that was conducted allowed the verification of the research hypothesis, stating that commercial banks in Poland are aware of the need to measure and monitor ESG risk increases. The research indicated that some of the banks in Poland are at an advanced stage of ESG risk management, while the rest of them are just starting their activities in this area. Currently, banks' involvement in ESG issues globally is one of the leading market trends. It becomes not only an option but an imperative for institutions wishing to maintain their market position. Therefore, commercial banks in Poland can and should participate in the implementation of sustainable development assumptions in the coming years.

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ESG Risk in Financial Decisions of Financial Markets and Companies

Cited by 3 publications

References 14 publications

Exposure to the ESG risk of the Polish banking sector

Exposure to the ESG risk of the Polish banking sector

Firm-level climate change risk and adoption of ESG practices: a machine learning prediction

ESG risk management in banks – towards its measurement

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