Abstract
Environmental, Social and Governance (ESG) is a set of standards, measures, and
practices followed by organizations to facilitate business operations that are
sustainable. The environment aspect is concerned with the protection of the
environment and natural resources. The social aspect involves organizations’ actions
towards prioritizing the well-being of their employees, while also having a positive
impact on society. Governance is concerned with business ethics and adequate
business conduct. The banking sector is also guided by ESG principles and each bank
reports annually on how they performed with that reporting period. South African banks
have not yet fully integrated ESG in their corporate strategies and decision-making
processes because the practice has not been made mandatory, banks are doing so
on voluntary basis. A mixed method research approach was applied for this study
through extensive review of the literature. The Corporate Sustainability Assessment
(CSA) ESG score shows Nedbank outperforming its peers in all aspects of the ESG
from the year 2017 to the year 2021, First Rand Bank is shown as the poorest
performing ESG integrator. ESG GPSTM ratings also show Nedbank being the leader
of ESG integration, followed by Standard bank, while Investec is illustrated as the
lowest performing bank. These scores are performed following international guidelines
such as The United Nations Global Sustainable Development Goals. There is then an
increasing need to make ESG reporting in South Africa mandatory and consistency
should be a key issue. It is also essential to make ESG scores publicly available to
promote transparency within banks practicing ESG reporting. The role that sustainable
finance is playing on the capital market is evident on how corporate success is being
reshaped. The literature indicates that companies practicing ESG integration have
better improved financial performances.
Keywords: ESG, corporate strategies, financial performance, sustainable finance,
international guidelines.