Carbon neutrality: The role of banks in optimal environmental management strategies

Sajid M. Chaudhry*, Asif Saeed, Rizwan Ahmed

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

This study explores the ecological ambitions of banks by studying the coincidence of economic realities with environmental management strategies. We address this question by studying the environmental performance of US banks and its impact on their tail risk as US is not committed to carbon neutrality in COP 21. We proxy economic reality with tail risk of banks and employ a novel extreme value theory to measure this. We use Asset4 ESG data for environmental performance score and test our hypothesis with a sample of 256 US banks. The results indicate that the US banks are ecologically ambitious and their environmental strategies are likely to reduce their tail risk. This provides evidence that better environmental strategies do coincide with the economic realities. We test the consistency of our results by using alternate proxies for tail risk and find our results robust. Our results are also not driven by endogeneity concerns. Finally, our additional results show that the nature of relationship differs with corporate governance levels, CSR committee existence, institutional ownership presence and crisis period.
Original languageEnglish
Article number113545
JournalJournal of Environmental Management
Volume299
Early online date26 Aug 2021
DOIs
Publication statusE-pub ahead of print - 26 Aug 2021

Bibliographical note

© 2021, Elsevier. Licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

  • Environmental performance
  • Multivariate extreme value theory
  • Tail risk
  • Banks
  • ESG

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