Investigating the effect of ESG on retail banks’ customer equity

Abstract

AbstractEnvironmental, social and governance (ESG) has recently been gaining attention as an important consideration for corporate management strategies worldwide. Drawing on the literature surrounding equity theory and customer equity, this study aimed to investigate the influence of ESG on the customer equity of retail banks in Hong Kong. Based on a survey of 300 banking customers, the study found governance initiatives affected customer attitude, while environmental initiatives and social initiatives had no significant effect on it. Customer attitude provided a strong explanation for value equity, brand equity and relationship equity. Value equity and relationship equity had a positive influence on purchase intention, but the relationship between brand equity and purchase intention was insignificant. Customer attitude also mediated the relationship between governance initiatives and customer equity. The findings of this study add value to the understanding of sustainable marketing initiatives and responsible banking. The study contributes to the development of the ESG and customer equity literature and advances the implementation of sustainable banking practices. Practically, the results of this study suggest that banking practitioners should focus on governance initiatives as a primary driver of customer equity and purchase intention. Understanding the role of ESG initiatives in customer attitude and customer equity can help to develop and improve sustainable marketing strategies. Policymakers can use a governance approach to promote sustainable and responsible banking practices.