The effect of sustainability reporting on bank risk-taking and sustainable growth rate

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Abstract

This study examines the effects of sustainability reporting, using environmental, social, and governance (ESG) disclosure practices, on banks’ risk-taking and sustainable growth rates (SGR). The study was motivated by the need to provide empirical evidence on the relevance of sustainability reporting in a developing country with a weak institutional framework and limited enforcement. Using ESG disclosure scores data from Bloomberg for banks listed on the Nigerian Stock Exchange (NGX) from 2014 to 2023, we model ESG aggregate and disaggregate dimensions as explanatory variables, with the non-performing loans (NPL) ratio and SGR as dependent variables, based on stakeholder theory. The panel corrected standard error (PCSE) and two-stage least squares (2SLS) models addressed endogeneity issues. Our findings reveal that ESG disclosures have a negative and significant impact on bank risk-taking, with the environmental disclosure dimension having the most substantial effect on improving banks’ asset quality. Also, ESG had a negative and insignificant relationship with the SGR and net interest margin, financial leverage, and net income per employee are positive and significant determinants of sustainable growth. The research contributes to the existing literature on sustainability reporting, providing both theoretical and practical implications amid the growing trend of ESG rollbacks worldwide.

Keywords: Sustainability Reporting, Environmental, Social, Governance, Disclosures, Banks Risk-Taking, Sustainable Growth Rate, Non-Performing Loans, Banking Sector

Authors’ individual contribution: Conceptualization — E.A.; Methodolgy — E.A. and F.O.A.; Formal Analysis — E.A. and F.O.A.; Investigation — E.A. and F.O.A.; Resources — E.A. and F.O.A.; Writing — Original Draft — E.A.; Writing — Review & Editing — E.A. and F.O.A.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C3, M1, M4

Received: 01.09.2025
Revised: 21.10.2025; 19.11.2025; 20.02.2026
Accepted: 23.03.2026
Published online: 26.03.2026

How to cite this paper: Agha, E., & Ashogbon, F. O. (2026). The effect of sustainability reporting on bank risk-taking and sustainable growth rate. Corporate Governance and Sustainability Review, 10(2), 134–149. https://doi.org/10.22495/cgsrv10i2p12