Abstract
The present paper highlights the need to adopt sustainability strategies in the Romanian banking sector, from the perspective of the importance of the role of financial intermediary that commercial banks have, also reflecting the positive impact of these strategies on financial performance. The empirical study involved the use of linear regressions and processing by a program specialized in statistics and data science (Stata), and emphasizes the impact of environmental, social and governance (ESG) factors on Romanian banks and the opportunity to implement them in their own risk management strategies. For this purpose, were considered independent variables, at the microeconomic level: return on assets, the leverage multiplier, the credit-deposit ratio, the number of members of the management body, and at the macroeconomic level: the unemployment rate, the inflation rate and the growth rate of the Gross Domestic Product. The dependent variable used was the dummy variable called ESG. The results of our research show that, as the return on assets or the leverage multiplier increases, the probability that the bank implements a risk management strategy associated with environmental, social and governance factors decreases, and the number of members of the management body positively impacts the decision to get involved in social responsibility activities. Through this research was assessed the opportunity to integrate the risks associated with sustainable development within the strategies of development and risk management at the level of financial intermediaries and the importance of standardizing sustainable practices throughout the entire banking system in Romania.
Highlights
In a rapidly expanding world, with a focus on obtaining short-term profits, demographic changes, migration, globalization, digitalization, have emerged side effects, with a significant impact on the economy and society
Integrating ESG risks are challenges for the sustainability of banking business. The transformation of these challenges in a strategic opportunity at the level of the banking system in Romania can be achieved by the gradual implementation, the adaptation of the good practices, the creation of the instruments for measuring the impact, the modification/ completion of the governance framework at the banks level, the adequate training of the banking staff and customers
The presented case study highlights the fact that there is interest at the level of the Romanian banking system in defining and implementing an efficient management regarding the sustainability risk, in order to ensure the necessary conditions for continuous development, by identifying and evaluating the specific risks, starting from the social, economic and environmental vulnerabilities we are facing
Summary
In a rapidly expanding world, with a focus on obtaining short-term profits, demographic changes, migration, globalization, digitalization, have emerged side effects, with a significant impact on the economy and society. Without consistent reflection and addressing the risk component, social, economic and environmental vulnerabilities will affect sustainability, both at the company level and at the systemic level. Integrating sustainability criteria involves designing and developing a new business model for each company, including banks. The implementation of a business model adapted to the sustainability requirements entails additional financial and human costs (creation of specialized departments, the inclusion of new positions connected to sustainable development in the organization’s governance structure). This approach involves, in most cases, radical changes in the definition of development and financing strategies, the risk management framework and corporate governance
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