The 3rd Conference on Sustainable Banking and Finance CSBF 2025

This paper investigates whether Environmental, Social and Governance (ESG) performance can boost innovation in the banking sector. Relying on a unique dataset of all publicly listed financial institutions globally from 2015 to 2022 and using patent filings as a proxy of banks’ innovation, we employ logit regression models to assess if the likelihood of banks engaging in patenting activities is affected by their sustainable performance. Our regression results show a positive and significant relationship between bank's ESG performance and the likelihood of patenting. Further analyses prove the individual contributions of pillars E, S and G, confirming that a greater sustainable performance is positively associated with a higher propensity to innovate. These findings offer valuable insights, especially for practitioners and policy makers, underlining the strategic role of sustainability in driving financial institutions’ propensity to innovate.