Sustainability, Development, and Financial Performance of Banks in the United Kingdom

Sustainable development, driven by responsibility toward the planet and society, has become a central focus across sectors. In response, the Environmental, Social, and Governance (ESG) framework has emerged as a key approach to evaluating corporate sustainability performance. While extensive literature explores ESG's broader implications, limited research has specifically addressed its impact on the financial performance of the banking sector in the United Kingdom. This study investigates the relationship between ESG performance and the financial outcomes of UK-listed banks included in the FTSE 100 Index. ESG scores are used as the independent variable, with financial performance measured through accounting-based indicators—Return on Assets (ROA) and Return on Equity (ROE), and the market-based measure of market value. Using panel data from 2017 to 2022, the results show that ESG performance has a significant positive impact on ROA, a significant negative impact on ROE, and an insignificant negative effect on market value. These findings offer practical insights for UK banking managers and policymakers in balancing ESG initiatives with financial goals, particularly in optimizing ESG strategies that align with profitability and shareholder value.