Evolution of Greenium. ESG and the Cost of Equity in the Polish Banking Sector
DOI:
https://doi.org/10.15611/fins.2026.1.02Keywords:
greenium, ESG, cost of equity, banking sector, sustainable financeAbstract
Aim: The aim of the study was to examine the impact of Environmental, Social, and Governance (ESG) performance on the cost of equity of commercial banks listed on the Warsaw Stock Exchange, with particular emphasis on the role of individual ESG pillars. Specifically, the study investigated how this relationship dynamically evolves across distinct phases of the energy transition in Poland.
Methodology: The empirical analysis was based on panel data covering the period 2012–2024. The cost of equity was estimated using the Capital Asset Pricing Model (CAPM). A two-way fixed effects model with Driscoll-Kraay standard errors was applied, while ESG variables were lagged by one period to mitigate endogeneity concerns. The static baseline specification was extended to include a phase-interaction framework to capture time-varying transition risks.
Findings: The static baseline results did not confirm a classical ‘greenium’ for the aggregate ESG score, however an ‘inverted greenium’ was observed specifically within the Social pillar. Furthermore, the dynamic phase-based analysis uncovered a significant structural shift in ESG pricing. The market's assessment evolved from initial indifference (2012–2014), through a period of penalisation where ESG was perceived as a costly burden (2015–2021), to the materialisation of a statistically significant greenium in the most recent, high-intensity energy transition phase (2022–2024).
Implications: The findings demonstrate that the financial benefits of ESG engagement in transitionintensive emerging markets are not immediate. Investor perception of sustainability shifts dynamically, from initial indifference, through a compliance cost, to a risk-mitigating asset, depending on the maturity of the regulatory environment and the escalating pressures of the energy transition. This suggests that realizing the financial benefits of ESG investments may require a longer-term strategic perspective.
Originality/value: This paper significantly contributes to the literature by demonstrating the non-linear, time-varying nature of ESG pricing in the banking sector. It provides novel empirical evidence on how context-dependent structural constraints and energy transition risks shape the delayed emergence of a greenium in one of the Central and Eastern European markets.
Downloads
References
Azmi, W., Hassan, M. K., Houston, R., & Karim, M. S. (2021). ESG activities and banking performance: International evidence from emerging economies. Journal of International Financial Markets, Institutions and Money, 70, 101277. https://doi.org/10.1016/J.INTFIN.2020.101277
Bătae, O. M., Dragomir, V.-D., & Feleagă, L. (2020). Environmental, Social, Governance (ESG), And Financial Performance of European Banks. Journal of Accounting and Management Information Systems (JAMIS), 19(3), 480-501. https://doi.org/10.24818/JAMIS.2020.03003
Bolton, P., & Kacperczyk, M. (2021). Do investors care about carbon risk? Journal of Financial Economics, 142(2), 517-549. https://doi.org/10.1016/J.JFINECO.2021.05.008
Bryl, Ł. (2026). Revisiting the Corporate Governance-ESG Performance Nexus: Insights from the CEE Companies. Central European Economic Journal, 13(60), 56-75. https://doi.org/10.2478/CEEJ-2026-0004
Buła, R., Foltyn-Zarychta, M., & Krawczyńska, D. (2024). Disentangling ESG: Environmental, social and governance ratings and financial performance of Polish listed companies. Ruch Prawniczy, Ekonomiczny i Socjologiczny, 86(1), 149-178. https://doi.org/10.14746/RPEIS.2024.86.1.09
Chava, S. (2014). Environmental Externalities and Cost of Capital. Management Science, 60(9), 2223-2247. https://doi.org/10.1287/MNSC.2013.1863
Chen, Y., Li, T., Zeng, Q., & Zhu, B. (2023). Effect of ESG performance on the cost of equity capital: Evidence from China. International Review of Economics & Finance, 83, 348-364. https://doi.org/10.1016/J.IREF.2022.09.001
Dhaliwal, D. S., Li, O. Z., Tsang, A., & Yang, Y. G. (2011). Voluntary Nonfinancial Disclosure and the Cost of Equity Capital: The Initiation of Corporate Social Responsibility Reporting. The Accounting Review, 86(1), 59-100. https://doi.org/10.2308/ACCR.00000005
El Ghoul, S., Guedhami, O., Kwok, C. C. Y., & Mishra, D. R. (2011). Does corporate social responsibility affect the cost of capital? Journal of Banking & Finance, 35(9), 2388-2406. https://doi.org/10.1016/J.JBANKFIN.2011.02.007
Friede, G., Busch, T., & Bassen, A. (2015). ESG and financial performance: Aggregated evidence from more than 2000 empirical studies. Journal of Sustainable Finance & Investment, 5(4), 210-233. https://doi.org/10.1080/20430795.2015.1118917
Gajdzik, B., Wolniak, R., & Grebski, W.-W. (2026). Poland’s Renewable Energy Transition (2010-2023): A Fuzzy Time Series and Multi-Criteria Assessment of Transition Quality in Electricity Production. Energies, 19(5), 1248. https://doi.org/10.3390/EN19051248
Goss, A., & Roberts, G. S. (2011). The impact of corporate social responsibility on the cost of bank loans. Journal of Banking & Finance, 35(7), 1794-1810. https://doi.org/10.1016/J.JBANKFIN.2010.12.002
Hampl, F., & Vágnerová Linnertová, D. (2024). How do ESG controversies moderate the nexus between ESG performance and cost of capital? Evidence from European listed companies. Managerial Finance, 50(10), 1727-1746. https://doi.org/10.1108/MF-12-2023-0762
Lintner, J. (1965). Security prices, risk, and maximal gains from diversification. The Journal of Finance, 20(4), 587-615. https://doi.org/10.1111/J.1540-6261.1965.TB02930.X
López-Penabad, M. C., Iglesias-Casal, A., Neto, J. F. S., & Maside-Sanfiz, J. M. (2023). Does corporate social performance improve bank efficiency? Evidence from European banks. Review of Managerial Science, 17(4), 1399-1437. https://doi.org/10.1007/S11846-022-00579-9
Modigliani, F., & Miller, M. H. (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review, 48(3), 261-297.
Mohammad, W. M. W., Osman, M., & Rani, M. S. A. (2023). Corporate governance and environmental, social, and governance (ESG) disclosure and its effect on the cost of capital in emerging market. Asian Journal of Business Ethics, 12(2),
175-191. https://doi.org/10.1007/S13520-023-00169-2
Pástor, Ľ., Stambaugh, R. F., & Taylor, L. A. (2021). Sustainable investing in equilibrium. Journal of Financial Economics, 142(2), 550-571. https://doi.org/10.1016/J.JFINECO.2020.12.011
Sharpe, W. F. (1964). Capital asset prices: A theory of market equilibrium under conditions of risk. The Journal of Finance, 19(3), 425-442.
Siwiec, K., & Karkowska, R. (2024). Relationship between ESG and Financial Performance of Companies in the Central and Eastern European Region. Central European Economic Journal, 11(58), 178-199. https://doi.org/10.2478/CEEJ-2024-0013
Tóth, B., Lippai-Makra, E., Szládek, D., & Kiss, G. D. (2021). The contribution of ESG information to the financial stability of European banks. Public Finance Quarterly, 66(3), 429-450. https://doi.org/10.35551/PFQ_2021_3_7
Wong, R., Thi My Nguyen, H., & Abena Kwansa, N. (2024). ESG performance and cost of capital: What do we know? Evidence from the US. International Journal of Monetary Economics and Finance, 17(1), 74-96. https://doi.org/10.1504/IJMEF.2023.10059849
Zerbib, O. D. (2019). The effect of pro-environmental preferences on bond prices: Evidence from green bonds. Journal of Banking & Finance, 98, 39-60. https://doi.org/10.1016/J.JBANKFIN.2018.10.012
Downloads
Published
License
Copyright (c) 2026 Katarzyna Perez, Alan Celmerowski, Tomasz Gabrusewicz
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Accepted 2026-04-28
Published 2026-06-11
