Communications of sustainability practices in the banking sector: Evidence from cross-country analysis

This paper aims to empirically explore the content and the extent of sustainability disclosure in the banking sector in the European Union and the US. We empirically examine the implications of institutional theory within the banking sector context and provide classification of our sampled banks. In addition, a tailored sustainability index has been developed and content analysis has been employed to examine the current sustainability disclosure in the EU and the US banking sector. Using a sample of 483 report-year observations, the results reveal that the EU banks have carried out more sustainability disclosure compared to US banks, and banks in both regions are mostly interested in how their operations influence the society that banks operate in (direct social impact), followed by the indirect environmental impact of their products and services. We find evidence of the applicability of institutional theory in sustainability communications within our sample. Therefore, our findings provide a clearer break down of sustainability disclosure in the banking sector using a cross-country context. Finally, we update our sample to include 67 EU banks matched by 67 US banks for the period from 2013-2021 and use ESG scores to reflect the sustainability dimension and we report that EU banks outperform the US banks in three dimensions (the direct social, the direct environmental and the indirect social scores), while the US banks have the lead in the indirect environmental sustainability scores.