ESG criteria in the banking sector: impact on finance and sustainability

Abstract

This thesis examines the integration of ESG criteria in the banking sector, with a focus on their interaction with the Basel III and IV regulatory frameworks and their implications for financial stability and sustainable development. More specifically this study explores how ESG factors are reshaping banking practices in Europe and Greece. The research shows that the integration of ESG has changed from being a voluntary practice to becoming a strong component of banking strategies. Adopting the ESG principles by the banks not only improves their flexibility and decreases default risk but also strengthens their publicity, attracts investor confidence, and gain access to sustainable financial products. Further findings showed that the Basel Committee on Banking Supervision has recognized climate-related risks, inserting them into stress testing and capital adequacy requirements. At the EU level, regulations such as the SFDR, CSRD, and EU Taxonomy strengthen the role of ESG in banking governance, disclosure, and risk management. Case studies of EU banks such as Deutsche Bank, Santander, and Eurobank illustrate different scales and strategies of ESG integration. To be more precise Deutsche Bank demonstrates the challenges and opportunities of inserting sustainability within a global institution, Santander shows the importance of measurable, sector-specific decarbonization targets and while Eurobank displays how regional banks can support national energy transitions and local sustainable development. In the end, the data confirms that ESG is not only compatible with prudential regulation but also essential for promoting long-term financial stability and contributing to the transition toward a sustainable economy.