This study examines the impact of aggregate and disaggregate environmental, social and corporate governance (ESG) activities on the financial performance of banking firms in the ASEAN-5 countries, a critical market characterized by its bank-based financial system. The analysis draws on data from 32 listed banks in Indonesia, Malaysia, the Philippines, Singapore and Thailand over the period 2015 to 2022 using a two-step Generalized Method of Moments and Least Squares Dummy Variable estimators. By incorporating macroeconomic, bank-specific and financial development indicators, the findings reveal that the aggregate ESG activities positively influence financial performance. Consistently, the disaggregate (individual pillar) ESG activities of social and governance posit positive impacts on FP, whilst the environmental pillar shows no significant influence. These findings underscore the heterogeneous contributions of the individual ESG pillars to bank performance in the ASEAN-5 context. By disaggregating ESG activities into their respective pillars, this study contributes to the literature by offering pillar-specific evidence on the ESG–FP relationship, moving beyond the conventional focus on aggregate ESG. Practically, the findings imply the need for tailored ESG strategies to ensure profitability of banks in ASEAN and other developing markets. Policymakers are encouraged to develop and enforce robust ESG regulations both at country and ASEAN levels to support sustainable banking activities and further promote financial stability in the region.

This paper investigates how ESG activities shape bank risk-taking in ASEAN-5, focusing on liquidity creation (LC) as a transmission channel and bank funding structure (BFS) as a conditioning environment. Using an unbalanced panel of 62 banks over 2015–2024, the study measures ESG activities with Refinitiv ESG scores, bank risk-taking (BRT) with non-performing loans, and LC with the loan-to-deposit ratio. The empirical strategy combines static estimators (pooled OLS, fixed and random effects) with dynamic System GMM and LSDVC estimators to address persistence, endogeneity and unobserved heterogeneity. Mediation is assessed through a Baron and Kenny procedure in the dynamic setting, while moderation is examined via the ESG × BFS interaction term. ESG engagement significantly reduces BRT, confirming a risk-disciplining role. ESG also increases LC, and higher LC is associated with lower BRT, supporting partial mediation of the ESG-risk link through LC. The ESG × BFS interaction is negative and statistically significant, indicating that stable, deposit-based funding strengthens the risk-reducing impact of ESG. Results are robust across static, System GMM and LSDVC estimators. This study advances ASEAN-5 banking research by examining the intermediation channel through which ESG activities affect BRT, specifically LC mediation and BFS moderation, within a unified dynamic framework. By doing so, it complements prior ASEAN-5 evidence on the ESG-AI digital-capability channel and links sustainability policies, intermediation behaviour, and liability structure in emerging ASEAN economies.

Purpose: This paper examines whether annual transition (low-carbon) capital expenditure (ENV Capex) enhances bank performance and through which mechanisms in the U.S. banks, positing two mediators: credit-risk discipline, proxied by credit default swap (CDS) spreads, and sustainable intermediation, proxied by sustainability-linked lending (SLL) intensity. Grounded in the Resource-Based View, Stakeholder Theory, and Signaling Theory, ENV Capex is treated as a tangible capability whose value materializes when governance converts spending into credible, monitored targets that investors recognize. Design/methodology/approach: Using an unbalanced panel of 113 banks from 2014 to 2023 assembled from Bloomberg ENV, Fundamentals, and Sustainable-Finance datasets, the study estimates a two-step System-GMM to address performance persistence, endogeneity, and unobserved heterogeneity, and evaluates mediation within a dynamic specification with bootstrap inference while modelling governance quality as a moderator of the ENV Capex–CDS relationship. Findings: The results show a positive direct association between ENV Capex and market valuation (Tobin's Q), alongside economically meaningful indirect effects operating through both channels: higher ENV Capex is associated with narrower CDS spreads and greater SLL intensity, and both pathways are linked to higher valuation. Consistent patterns are also observed for accounting-based performance measures (ROA and ROE), indicating that the valuation effects are supported by realized profitability rather than market sentiment alone. Governance strengthens the risk-discipline pathway, suggesting that credible oversight is a precondition for markets to price the benefits of sustainability investment. Originality/value: The paper contributes to the ESG and banking literature by identifying ENV Capex as a more specific bank-year measure of environmental investment than broad ESG proxies and by examining whether its association with performance is reflected through two finance-oriented channels, namely CDS-based risk discipline and SLL intensity. Methodologically, the study adds incremental value by applying a dynamic System-GMM mediation framework that accounts for persistence, endogeneity and unobserved heterogeneity, while interpreting the evidence cautiously as mechanism-consistent rather than definitively causal. For managers and supervisors, the findings highlight the importance of governance standards, KPI integrity and verifiable SLL design in strengthening credibility, limiting greenwashing concerns and linking measurable environmental investment to risk-adjusted value creation.

This study evaluates the empirical validity of seven influential sustainability theories, Stakeholder Theory, Legitimacy Theory, Institutional Theory, Agency Theory, the Resource-Based View, Dynamic Capabilities Theory, and Signaling Theory, within finance- and economics-oriented environmental, social, and governance (ESG) research. A theory-driven systematic review was conducted using Scopus and Web of Science and reported in accordance with PRISMA 2020. The final corpus comprised 67 peer-reviewed empirical studies. Each study was coded according to its focal theory, ESG operationalisation, financial outcome channel, methodological design, mechanism, and boundary conditions, and the evidence was classified as supported, partially supported, mixed, or contradicted using predefined adjudication rules. The findings reveal substantial variation in empirical support across theories. Agency Theory records the strongest within-corpus consistency, with all ten studies supporting its governance, monitoring, and incentive-alignment mechanisms. Legitimacy Theory and the Resource-Based View also receive strong support, particularly where substantive disclosure practices or embedded organisational resources are connected to financial outcomes. Stakeholder and Institutional theories show moderate and context-dependent support, whereas Signaling Theory and Dynamic Capabilities Theory produce weaker and more heterogeneous evidence. The explanatory strength of each theory varies across ESG measurement approaches, financial outcome channels, institutional settings, and methodological designs. Disclosure credibility is particularly important for signaling and legitimacy mechanisms, while capability-based explanations are stronger when ESG is measured through operational performance rather than disclosure alone. The study contributes a comparative theory-adjudication framework that moves beyond routine theory citation by identifying the mechanisms, outcome channels, and boundary conditions under which sustainability theories receive empirical support.