ESG factors in reputational risk assessment of Russian banks

Abstract

This article discusses risks for financial institutions associated with the transition to sustainable development and aims to determine the role of ESG factors in maintaining the reputation of Russian banks based on the development of a reputation risk assessment methodology that assumes ESG factors, which we test using data of systemically important Russian banks. The achievement of this goal is mediated by methods of theoretical analysis of publications, the use of ratings and ranking, the quantitative methods. Key theoretical positions and conclusions are formulated within the concept of sustainable development and a green economy. The main hypothesis is that for systemically important Russian banks, the influence of ESG factors on business reputation is manifested in the same way as for foreign counterparts: positive changes and efforts of banks in achieving sustainable development goals contribute to positive changes in financial indicators and strengthening business reputation. It was revealed that the efforts of systemically important Russian banks in achieving sustainable development goals really contribute to the growth of the business reputation of banks, but they can occur against the background of both improvement and deterioration in the dynamics of financial indicators, that is, the study hypothesis was partially confirmed. A possible reason is the features of the modern stage of the formation of a green economy in Russia. Under these conditions, it becomes important to avoid alarmist sentiment and premature use of ESG ratings for the purposes of banking regulation or investment decisions.