Climate Risk, ESG Performance, and ESG Sentiment for U.S. Commercial Banks

52 Pages Posted: 4 Dec 2022 Last revised: 3 Dec 2023

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

University of San Francisco

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship

Hassan Tehranian

Boston College - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: November 12, 2022

Abstract

We measure the exposure to and materiality of physical climate risk for U.S. commercial banks through branch-level information. Our location-specific climate risk measure is positively associated with the environmental, social, and governance (ESG) performance of banks and negatively associated with their stakeholders' sentiment on ESG issues. Further, banks that experience climate risk shocks, as proxied by NOAA billion-dollar disasters, increase their ESG performance and accordingly receive positive ESG sentiment compared to matched banks. While negative sentiment due to climate risk exposure is associated with worse financial performance, a stronger ESG engagement mitigates this adverse effect.

Keywords: Commercial banks; Climate risk; ESG performance; ESG sentiment

JEL Classification: G11, G12, G14, G21

Suggested Citation

Erhemjamts, Otgontsetseg and Huang, Kershen and Tehranian, Hassan, Climate Risk, ESG Performance, and ESG Sentiment for U.S. Commercial Banks (November 12, 2022). Global Finance Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=4275638 or http://dx.doi.org/10.2139/ssrn.4275638

Otgontsetseg Erhemjamts (Contact Author)

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

Kershen Huang

Nova Southeastern University - H. Wayne Huizenga School of Business & Entrepreneurship ( email )

3301 College Avenue
Fort Lauderdale, FL 33314
United States

HOME PAGE: http://bit.ly/kershenhuang

Hassan Tehranian

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-3944 (Phone)
617-552-0431 (Fax)

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