Financing For Sustainability and Bank Performance: Case of G-20 Countries

Abstract

Unstable economic conditions and high uncertainty resulting from the COVID-19 pandemic and geopolitical tensions between Russia and Ukraine have made it difficult for global economic recovery. Banks has an important role in the economy to support the implementation of a sustainable economy through the disbursement of sustainable financing. The bank expects sustainability financing has a positive impact on financial performance. It can attract investors because one of the main priorities of investors at this time is a sustainable business. The study uses 68 banks from G-20-member countri3es and several countries in ASEAN that are not included in the G-20 from 2019 to 2021 performance. In assessing the impact of the disbursement of sustainable financing on financial performance (using the ratio of non-performing loans, net interest margin, and capital adequacy ratio as financial performance variables), the authors use panel data regression, while to assess the impact of sustainable financing distribution on ESG performance using binary logistic regression. The results show that there is a significant positive impact from the distribution of sustainable financing on net interest margins and the capital adequacy ratio, and a significant negative impact on the non-performing loans ratio. In addition, this study’s results also show a significant positive impact on improving ESG performance. This shows that by the disbursement of sustainable financing, banks will get a positive impact on financial performance and can attract investors.