A growing body of research suggests that the composition of a firm’s board of directors can influence its environmental, social and governance (ESG) performance. In the banking industry, ESG performance has not yet been explored to discover how a critical mass of women on the board of directors affects performance. This paper seeks to fill this gap in the literature by testing the impact of a critical mass of female directors on ESG performance. Other board characteristics are accounted for: independence, size, frequency of meetings and Corporate Social Responsibility (CSR) committee. We use fixed effects panel regression models on a sample of 108 listed banks in Europe and the United States for the period 2011–2016. Our main empirical evidence shows that the relationship between women on the board of directors and a bank’s ESG performance is an inverted U-shape. Therefore, the critical mass theory for banks is not supported, confirming that only gender-balanced boards positively impact a bank’s performance for sustainability. There is a positive link between ESG performance and board size or the presence of a CSR committee, while it is negative with the share of independent directors. With this work, we stress the key role of corporate governance principles in banks’ ESG performance, with relevant implications for both banks and supervisory authorities.

The growing interest in corporate social responsibility (CSR) issues is the result of a cultural path that sees banks react to market changes and become protagonists of an increasingly sustainable future. Based on these considerations, this paper intends to investigate the level of integration of sustainability issues in banks’ corporate governance systems. We carry out an exploratory analysis on all European systematically important banks during the period 2015–2019. By adopting the content analysis approach, we develop a novel governance score based on a research model made up of 40 items. We name the score: “Bank’s governance ESG (Environmental Social Governance) integrated index”. The main results of our study reveal not only growing awareness of banks to integrate sustainability in their corporate governance, but also a strong heterogeneity in their corporate behaviours and large rooms for improvement. Indeed, we find that just over half of the surveyed banks pay really attention to the integration of sustainability issues in their business and governance processes. This contribution is especially driven by the banks’ boards of directors, whose size and composition contribute positively to overall sustainable performance. To the best of the authors’ knowledge, this is the first empirical study that investigates the level of integration of ESG factors in the banking sector, developing a quantitative score ranging from 0 to 100%. This study differs from previous studies in that it develops an “Bank’s governance ESG integrated index”, which considers the areas of corporate governance that have the greatest impact on the implementation of sustainable practices in banks. Our research is limited to investigating the level of integration of ESG factors for listed banks over a 5-year period. In fact, our time horizon is represented by the four-year period 2015–2019. This research has practical implications. First, investors more attentive on sustainability issues could identify and select the banks that best implement ESG criteria in their corporate governance systems. Second, our research model could be adopted by banks as a “diagnostic tool” to carry out a self-assessment process and identify possible room for improvement.