ESG Disclosure and Financial Performance in Indian Banking: Evidence from a Panel Data Analysis

Abstract

Environmental, Social, and Governance (ESG) disclosure has become an important part of corporate reporting, especially in the banking sector where institutions influence the economy not only through their own operations but also through lending, investment, and financial intermediation. In India, increasing regulatory focus on sustainability reporting has encouraged banks to strengthen their ESG disclosures. However, empirical evidence on whether ESG disclosure contributes to financial performance in Indian banking remains limited. This study examines the relationship between ESG disclosure and financial performance using panel data from 12 major public and private sector banks in India covering the period 2015–2024. ESG disclosure is measured through a self-constructed disclosure index based on publicly available annual reports, sustainability disclosures, and BRSR reports. Financial performance is assessed using Return on Assets (ROA) and Return on Equity (ROE). The study applies pooled ordinary least squares, fixed effects, and random effects models, with the Hausman test used for model selection. The findings indicate a positive and statistically significant relationship between ESG disclosure and financial performance. The study suggests that stronger sustainability disclosure may contribute to better transparency and stronger institutional credibility. These findings offer useful insights for banking practitioners, regulators, and policymakers working toward sustainable financial governance.