Sustainable metamorphosis: examining sustainability transformation into value of financial institutions

    Indrė Lapinskaitė Affiliation
    ; Viktorija Skvarciany Affiliation


The relevance of sustainable development in the financial institution and its value is significant in today’s financial landscape. This research aims to evaluate the efficiency of converting sustainable development outcomes, quantified through ESG, into a financial institution’s valuation, measured by the P/E ratio. In order to reach the aim, the DEA method was applied. The results reveal that only one financial institution has an efficiency score of 1, signifying a notable efficiency level. Most financial institutions in the dataset possess efficiency scores (represented by theta) below 0.1, indicating a relative inefficiency in converting their E, S, and G scores into P/E ratios. The results reveal that high E, S, and G scores do not result in higher P/E ratios. It might be advisable to diversify investments across different financial institutions with diverse ESG profiles to mitigate risk and optimise returns. These potential research perspectives offer opportunities for a more profound understanding of the connection between ESG factors and the valuation of financial institutions. They allow for an examination of the quality and transparency of ESG reporting, considering the specific internal factors relevant to international financial institutions, as ESG continues to gain recognition as an integral component of a company’s intangible assets.

First published online 04 January 2024

Keyword : ESG, P/E ratio, financial institutions, diversified financial services and capital markets, insurance companies, banks, efficiency, data envelopment analysis (DEA)

How to Cite
Lapinskaitė, I., & Skvarciany, V. (2023). Sustainable metamorphosis: examining sustainability transformation into value of financial institutions. Journal of Business Economics and Management, 24(5), 923–938.
Published in Issue
Dec 29, 2023
Abstract Views
PDF Downloads
Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.


Aich, S., Thakur, A., Nanda, D., Tripathy, S., & Kim, H.-C. (2021). Factors affecting ESG towards impact on investment: A structural approach. Sustainability, 13(19), Article 10868.

Atkins, J., Doni, F., Gasperini, A., Artuso, S., La Torre, I., & Sorrentino, L. (2023). Exploring the effectiveness of sustainability measurement: Which ESG metrics will survive COVID-19? Journal of Business Ethics, 185(3), 629–646.

Ball, R. (2020). Examining the relationship between ESG performance and financial performance of firms listed on the JSE.

Cappucci, M. (2018). The ESG integration paradox. Journal of Applied Corporate Finance, 30(2), 22–28.

Chaudhary, R., & Arora, H. D. (2022). Efficiency evaluation of public and nationalized Indian banks using data envelopment analysis. International Journal of System Assurance Engineering and Management, 13(1), 469–478.

Chen, S., Song, Y., & Gao, P. (2023). Environmental, social, and governance (ESG) performance and financial outcomes: Analyzing the impact of ESG on financial performance. Journal of Environmental Management, 345, Article 118829.

Cornell, B. (2021). ESG preferences, risk and return. European Financial Management, 27(1), 12–19.

Dhasmana, S., Ghosh, S., & Kanjilal, K. (2023). Does investor sentiment influence ESG stock performance? Evidence from India. Journal of Behavioral and Experimental Finance, 37, Article 100789.

Ding, L., Lei, L., Wang, L., & Zhang, L. (2020). Assessing industrial circular economy performance and its dynamic evolution: An extended Malmquist index based on cooperative game network DEA. Science of The Total Environment, 731, Article 139001.

Do, N. H., & Pham, N. V. T. (2020). The influence of sustainable earnings on stock price: evidence from publicly listed Vietnamese business enterprises. Asian Academy of Management Journal of Accounting and Finance, 16(2), 101–121.

Du Toit, E., & Lekoloane, K. (2018). Corporate social responsibility and financial performance: Evidence from the Johannesburg stock exchange, South Africa. South African Journal of Economic and Management Sciences, 21(1), Article 1799.

Duque-Grisales, E., & Aguilera-Caracuel, J. (2021). Environmental, social and governance (ESG) scores and financial performance of multilatinas: Moderating effects of geographic international diversification and financial slack. Journal of Business Ethics, 168(2), 315–334.

Ernst & Young. (2021). The future of sustainability reporting standards. EY. Oxford Analytica.

Fan, Y., & Fang, C. (2020). Circular economy development in China-current situation, evaluation and policy implications. Environmental Impact Assessment Review, 84, Article 106441.

Ferreira, C. (2020). Evaluating European bank efficiency using data envelopment analysis: Evidence in the aftermath of the recent financial crisis. International Advances in Economic Research, 26(4), 391–405.

Ford, J. M., Gehricke, S. A., & Zhang, J. E. (2022). Option traders are concerned about climate risks: ESG ratings and short-term sentiment. Journal of Behavioral and Experimental Finance, 35, Article 100687.

Gary, S. N. (2019). Best interests in the long term: Fiduciary duties and ESG integration. University of Colorado Law Review, 90, 731–801.

Guo, C., Zhang, R., & Zou, Y. (2023). The efficiency of China’s agricultural circular economy and its influencing factors under the rural revitalization strategy: A DEA–Malmquist–Tobit approach. Agriculture, 13(7), Article 1454.

Henisz, W., Koller, T., & Nuttall, R. (2019). Five ways that ESG creates value. McKinsey Quarterly.

Horvat, A. M., Milenković, N., Dudić, B., Kalaš, B., Radovanov, B., & Mittelman, A. (2023). Evaluating bank efficiency in the West Balkan countries using data envelopment analysis. Mathematics, 11(1), Article 15.

Huang, H.-L., Liang, L.-W., Chang, H.-Y., & Hsu, H.-Y. (2021). The influence of earnings management and board characteristics on company efficiency. Sustainability, 13(21), Article 11617.

Hunt, N. D., Hill, J. D., & Liebman, M. (2017). Reducing freshwater toxicity while maintaining weed control, profits, and productivity: Effects of increased crop rotation diversity and reduced herbicide usage. Environmental Science & Technology, 51(3), 1707–1717.

Isaacs, W. (2015). What is a PE ratio? AllanGrey.

Junius, D., Adisurjo, A., Rijanto, Y. A., & Adelina, Y. E. (2020). The impact of ESG performance to firm performance and market value. Jurnal Aplikasi Akuntansi, 5(1), 21–41.

Kriek, J. H, Beekman, E., & Els, G. (2008). Fundamentals of finance: A practical guide to the world of finance (4th ed.). LexisNexis Butterworths.

Landi, G. C., Iandolo, F., Renzi, A., & Rey, A. (2022). Embedding sustainability in risk management: The impact of environmental, social, and governance ratings on corporate financial risk. Corporate Social Responsibility and Environmental Management, 29(4), 1096–1107.

Larcker, D. F., Tayan, B., & Watts, E. M. (2022). Seven myths of ESG. European Financial Management, 28(4), 869–882.

Lin, Y.-H., & Hong, C.-F. (2020). Efficiency and effectiveness of airline companies in Taiwan and Mainland China. Asia Pacific Management Review, 25(1), 13–22.

Lo, K. Y., & Kwan, C. L. (2017). The effect of environmental, social, governance and sustainability initiatives on stock value – examining market response to initiatives undertaken by listed companies. Corporate Social Responsibility and Environmental Management, 24(6), 606–619.

Lopez-de-Silanes, F., McCahery, J. A., & Pudschedl, P. C. (2020). ESG performance and disclosure: A cross-country analysis. Singapore Journal of Legal Studies, 217–241.

Maziotis, A., Villegas, A., Molinos-Senante, M., & Sala-Garrido, R. (2020). Impact of external costs of unplanned supply interruptions on water company efficiency: Evidence from Chile. Utilities Policy, 66, Article 101087.

Moufty, S., Clark, E., & Al-Najjar, B. (2021). The different dimensions of sustainability and bank performance: Evidence from the EU and the USA. Journal of International Accounting, Auditing and Taxation, 43, Article 100381.

MSCI ESG Research. (2021). Climate reality bites: Actually, we may not always have Paris. Beyond boom and bust. ESG investment finds its footing. To bee or not to bee: Investors tackle the biodiversity crisis. MSCI.

Rahi, A. F., Akter, R., & Johansson, J. (2022). Do sustainability practices influence financial performance? Evidence from the Nordic financial industry. Accounting Research Journal, 35(2), 292–314.

Rasmussen, J. (2020). The role of structural context in making business sense of investments for sustainability – A case study. Sustainability, 12(17), Article 7006.

S&P Global. (2022). ESG scores.

Sanchez‐Planelles, J., Segarra‐Oña, M., & Peiro‐Signes, A. (2022). Identifying different sustainable practices to help companies to contribute to the sustainable development: Holistic sustainability, sustainable business and operations models. Corporate Social Responsibility and Environmental Management, 29(4), 904–917.

Schmidt, A. (2019). Sustainable news – A sentiment analysis of the effect of ESG information on stock prices. SSRN Electronic Journal.

Skica, T., Leśniowska-Gontarz, M., & Miszczyńska, K. (2019). Measuring the efficiency of Polish municipalities – Data envelopment analysis approach. South East European Journal of Economics and Business, 14(2), 54–66.

Sokolova, N. A., & Teymurov, E. S. (2021). Correlation of sustainable development goals and ESG principles. Courier of Kutafin Moscow State Law University (MSAL)), 12, 171–183.

Sun, Y., & Qiu, Z. (2022). Positive performance feedback and innovation search: New ideas for sustainable business development. Sustainability, 14(4), Article 2086.

Thaker, K., Charles, V., Pant, A., & Gherman, T. (2022). A DEA and random forest regression approach to studying bank efficiency and corporate governance. Journal of the Operational Research Society, 73(6), 1258–1277.

United Nations Secretary-General’s. (2019). Roadmap for financing the 2030 agenda for sustainable development 2019–2021. United Nations.

Wall Street Journal. (2023). WSJ Markets.

Wang, S., Lei, L., & Xing, L. (2021). Urban circular economy performance evaluation: A novel fully fuzzy data envelopment analysis with large datasets. Journal of Cleaner Production, 324, Article 129214.

Wu, H., Yang, J., Wu, W., & Chen, Y. (2022). Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks. Central European Journal of Operations Research.

Zhang, G., Fang, C., Zhang, W., Wang, Q., & Hu, D. (2019). How does the implementation of the new environmental protection law affect the stock price of heavily polluting enterprises? Evidence from China’s capital market. Emerging Markets Finance and Trade, 55(15), 3513–3538.