The ESG Performance–Financial Stability Nexus: How Do Bank Risk Distribution and ESG Uncertainty Shape This Relationship?

Time: 13:00-15:00 (UK Time), Wednesday, 21 October 2026
Presenter: Professor Sandra Kendo, Catholic University of Lille
Chair: Professor Hong Bo, SOAS University of London
Online venue: Click here to join the seminar on Teams (For any inquiry about how to join the online seminar, please contact Dr. Meng Xie at xm1@soas.ac.uk)

Abstract
We analyse the impacts of ESG performance and its sub-pillars on financial stability across varying levels of risk-taking. Additionally, our research examines how ESG uncertainty influences financial stability and modifies the relationship between ESG performance and stability. We demonstrate that both risk exposure and ESG performance significantly affect financial stability. Banks with lower levels of risk-taking exhibit greater financial stability and higher ESG performance, whereas more fragile banks face greater ESG-related challenges. Moreover, environmental performance and governance scores have significant and distinct effects on financial stability, whereas social factors do not directly influence stability. When ESG uncertainty is included, it negatively impacts financial stability. ESG has a net negative effect on banks’ financial stability for the medium-uncertainty group. In contrast, a net positive effect is evident for both the low- and high-uncertainty groups. In a high-uncertainty environment, banks are more resilient as a result of strict, consolidated regulations.

Keywords: Financial stability; ESG; Risk-Taking, Uncertainty; One-step GMM; Panel quantiles.

Speaker

Sandra KENDO is an Associate Professor of Monetary Economics and Banking at the Catholic University of Lille. She holds the Chair in Business Ethics focused on Compliance, ESG, and Non-Financial Reporting. Her latest research addresses ESG and non-financial risks, corporate investment, and financial stability, with a focus on banks and SMEs. Through the Chair, she advances research in ESG analysis and develops non-financial reporting frameworks tailored to firms’ economic constraints. Since January 2023, she has led a funded applied research-action project (2023–2026) to develop a composite financial and non-financial index that measures SMEs’ engagement in ESG practices, using original survey data. The project is supported by the Catholic University of Lille with funding from the Department of the Hauts-de-France. Her research builds on previous work in banking structure, competition, and financing capacity, and has been published in Empirical Economics, The Quarterly Review of Economics and Finance, and Applied Economics. She contributes methodologically through advanced econometric techniques, especially panel and quantile regression. Her current work explores ESG and political risks, alternative risk indices, and data-driven approaches such as machine learning to evaluate their effects on corporate performance and financial stability.