STAP International Journal of Accounting and Business Intelligence

ISSN: 3105-3726

Green Innovation and the Sustainability of Banks in Europe

by 

Ali Alababneh

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Published: 2025/07/15

Abstract

The transition toward a low-carbon economy has placed unprecedented pressure on financial institutions to adopt environmentally responsible strategies. Within the European Union (EU), banks are increasingly called upon to integrate green innovation (GI) into their operations and financing activities as part of broader efforts to achieve the goals of the EU Green Deal, Corporate Sustainability Reporting Directive (CSRD), and Sustainable Finance Disclosure Regulation (SFDR). This study investigates the impact of GI on the sustainability performance of European banks across three dimensions: environmental, financial, and social. Grounded in the Resource-Based View, Stakeholder Theory, and Institutional Theory, the research employs a quantitative, cross-sectional survey of European banks supplemented by secondary ESG data. Using Partial Least Squares Structural Equation Modeling (PLS-SEM), the findings demonstrate that GI positively influences all three dimensions of sustainability, with particularly strong effects on environmental and social outcomes. Moreover, the analysis reveals that regulatory pressure and transparency in ESG disclosure significantly moderate these relationships, albeit with regional variation: regulatory pressure exerts greater influence in Southern Europe, while disclosure quality enhances impacts more strongly in Northern Europe. The study contributes theoretically by extending existing governance and sustainability frameworks, practically by offering actionable guidance to banks seeking to align competitiveness with sustainability, and politically by informing policymakers on the need for harmonized standards, supervisory capacity, and incentives to encourage GI adoption. Limitations and future research directions are discussed, including the need for longitudinal and cross-regional studies, as well as investigations into emerging technologies such as AI in sustainability reporting.

Keywords

Green innovationbank sustainabilityESG disclosureregulatory pressureEuropean Unionfinancial institutions

Green Innovation and the Sustainability of Banks in Europe is licensed under CC BY 4.0CCBY

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