Impact of sustainable investment on the financial performance. : Evidence from Pakistani banking sector

Abstract: This study explores how sustainable investment, which includes social, economic,and environmental sustainability, affects financial performance in Pakistan'sbanking sector. The study evaluates financial performance using ROA, ROE, NIM,and EPS using secondary data from 26 public and private banks' consolidatedfinancial statements from 2013 through 2022. The STATA-based data analysis,which employed methods including Random effect, and fixed effect, paints acomplex picture of the contribution of sustainability to company performance.Panel regression result shows that environment scores have positive and significantinfluence on ROE, ROE and negative influence on EPS. Further, results show thatsocial scores have positive effect on ROE and EPS and negative effect on ROA.Similarly, governance scores have a positive effect on EPS and negative effect onROA and ROE. The findings have implications for various stakeholders, includinginvestors, regulators, managers, and other interested parties. By implementing ESGinvestments raise awareness. By doing so, the positive influence of ESG on bankperformance can be enhanced, as individuals who prioritize environmental andsocial factors are more likely to choose these banks for their services andinvestments. It is advisable for policymakers and regulators to offer increasedsupport to enhance stakeholder awareness and encourage companies to excel in theareas of environment, social responsibility, and effective governance.