Assessment of ESG practices in banks listed in [B]³

Abstract

We sought to analyze whether the corporate governance characteristics of the Board of Directors (BoD), the capital structure, and the economic and financial performance of the firms influence the adoption of Environmental, Social, and Governance Policies (ESG) by banking institutions listed on the Brasil Bolsa Balcão [B]3. To this end, 24 banks listed in [B]3 were analyzed, via annual data made available from 2013 to 2020, in the Thomson Reuters® database and on the [[B]3 website, mainly through the analysis of Reference Forms of the institutions studied. To analyze the results, the Tobit regression model was estimated, using as a dependent variable the ‘assessment of ESG practices’, measured by an index ranging from 0 (for firms without ESG practices and/or without ESG assessment in the Refinitiv® database) to 100 (firms with best ESG practices) and, for independent variables, characterizations of banking firms and BoD, capital structure, and economic-financial performance indicators were used. Based on the results, it was noted that the size of the banks and the gender diversity of the BoD presented positive and significant statistics, demonstrating that larger banks with more women on the board tend to maintain ESG best practices. On the other hand, negative and significant statistical relationships were observed between the issuance of American Depositary Receive (ADRs), the number of independent Board members, and Board Interlocking (B.I.) practices and ESG best practices. However, the study contributes to the literature with the understanding of ESG events of Brazilian banks and with the regulatory demands of the Central Bank of Brazil as a result of the rules with requirements of Social and Environmental Responsibility by the regulatory body, as well as with the demands of stakeholders and the market for best ESG practices of banks.