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ESG Study 2024: Europe’s banks under the microscope

Our ESG Implementation Study 2024 reveals that the need for Europe’s banks to take action on ESG has become evident. Institutions have recognized that the consideration of environmental, social and governance factors – known as ESG factors – is crucial for them. However, there is obviously still a long way to go.

In cooperation with the Liechtenstein Bankers Association, zeb asked 36 European financial institutions, including large, state/cantonal and domestic-oriented banks, to self-assess their ESG status quo. The outlook for the institutions surveyed is sobering: the majority still face significant challenges on their path to sustainable transformation.

Selected core fields of action for banks

Our ESG Study results show that banks recognize the high importance of ESG. For the foreseeable future, however, there are not sufficient business successes. Only 25% of the banks surveyed have measured positive ESG contributions to their P&L, while 75% of the banks surveyed see some negative aspects for their own profits or cannot conclusively assess them.

Figure 1: ESG contributions to P&L

The “net-zero target” is undisputed for many banks. However, there are significant differences regarding the operating model and business portfolio. A full 44% of all institutions have not yet defined a net-zero target for their loan portfolio, while the figure for their operations stands at only 26%.

Figure 2: Net-zero ambitions of European banks

The consideration of ESG risks is still in its infancy. According to our ESG Study, ESG risks are seldom quantified with adequate specificity concerning their characteristics and impact. This is particularly due to the lack of availability of ESG data – a full 75% of institutions face major challenges in this area. Consequently, banks typically rely on external providers.

Recommended actions from the study for greater ESG maturity

Our study reveals that collaboration with internal and external stakeholders in setting and achieving ESG targets will be crucial for the competitive positioning of banks. In the area of risk management, physical and transition risks should be better integrated into the risk models, supported by advanced ESG data management. To this end, banks need to expand their capacities and skills.

Banks must therefore consistently focus on improving their ESG data skills, firmly integrate ESG in management processes and governance structures, and involve all stakeholders. Adequate ESG maturity will soon be just as important for Europe’s banks as good Wi-Fi in a hotel – not a USP, but a basic requirement for competitiveness.