European Journal of Business Science and Technology 2025, 11(2):163-181

The Impact of Environmental, Social and Governance (ESG) Pillar Scores on Banking Sector Stock Returns: An Empirical Analysis of Banks in the MSCI Emerging Market Index

Hüseyin Öcal¹, Tarık Yılmaz², Anton Abdulbasah Kamil¹

¹ Istanbul Gelişim University, Türkiye

² Marmara University, Istanbul, Türkiye

This article examines whether investing in ESG impacts banks’ stock returns, aiming to illustrate the value generated by ESG investment in the MSCI Emerging Markets Index. The fiscal year-end data of thirty-five financial companies within the Index, covering the period from December 31, 2015, to December 31, 2022, have been utilised. The analysis employs a pooled panel regression model utilising robust least squares estimation. Firm-specific and market-specific variables are used as independent variables. We have observed a significant positive direct relationship between the social pillar score and stock returns. Banks may initiate investments in social pillars in the Index. In addition, firm-specific variables such as market capitalisation, return on equity, capital adequacy, and price-earnings ratio influence the relationship between ESG pillar scores and stock returns. We recommend that portfolio managers closely monitor improvements in ESG pillar scores alongside firm-specific variables to predict banks’ stock returns in the index.

Keywords: financial ratios, stock return, portfolio investment, banking, MSCI emerging market index, ESG

JEL classification: C10, C51, G21, O16, Q50, Q56

Received: April 28, 2025; Revised: November 22, 2025; Accepted: December 4, 2025; Published: January 5, 2026  Show citation