The Determinants of the Environmental Performance of EU Financial Institutions: An Empirical Study with a GLM Model

Abstract

Within the last few decades, the issue of the environmental performance of European financial institutions has become a significant feature of their strategic plans. Financial institutions can contribute through their own activities and investments, and also through their relationship with economic sectors and consumers, in decreasing environmental footprint. The purpose of this research is to investigate the determinants that affect the environmental performance of European financial institutions. Financial markets have been selected as the main research field for this study, as it presents an opportunity for environmental policy and is useful in view of the need for a wider range of policy instruments. Moreover, on a more practical level, financial institutions can interact with the environment in several ways, such as investors, innovators, valuers, powerful stakeholders, and polluters. The study is based on a mixed methodology approach, which integrates: (i) bibliometric analysis based on R package and (ii) panel data analysis with the assistance of a generalized linear model (GLM). Findings show that socioeconomic, governance, and technology factors positively affect the environmental performance of European financial institutions. Moreover, the incorporation of alternative energy sources, such as renewable energy in the corporate function, is a requirement for greening the financial institutions. The above can guide financial institutions to develop the appropriate strategies for decreasing their environmental footprint, improving their operational efficiency, and becoming more attractive and competitive in the market.