Musa, HussamRech, FrederikGrofčíková, JankaCúg, Juraj2026-06-012026-06-0120262083-12772353-1827https://doi.org/10.24136/oc.4174https://repo.umb.sk/handle/123456789/1482In: Oeconomia Copernicana. Olsztyn : Institute of Economic Research, 2026. ISSN 2083-1277. Vol. 17, no. 1 (2026), pp. 105-139.Research background: The link between environmental, social, and governance (ESG) performance and bank financial stability is of high academic and regulatory interest, yet global evidence is mixed. Clarifying this relation is important for resilient banking systems under rising sustainability pressures. Purpose of the article: To examine the association between ESG performance and bank financial stability, assessing both composite scores and the individual pillars, and documenting heterogeneity across bank financial stability, ESG profiles, and economic conditions. Methods: The analysis draws on a global panel of 4,466 bank-year observations from 688 banks across 84 countries over 2013–2024. ESG data come from MSCI ESG Ratings, and bank financial stability is measured using the natural logarithm of the Z-score. Baseline estimates use fixed effects with bank, country, and year effects. To account for persistence and potential endogeneity in bank financial stability, we additionally estimate dynamic panel models using the two-step Arellano–Bond GMM estimator. Findings & value added: The composite ESG score is positively associated with bank financial stability, but the effect is economically and statistically negligible in fixed effects models. Pillars diverge: governance is positive and significant, social is negative, and environmental shows no clear link. Heterogeneity is pronounced, with ESG aligning with higher bank financial stability mainly among already stable banks, while fragile banks face adverse associations. During the COVID‑19 period, the social pillar improves toward neutral or mildly beneficial, while the governance effect weakens. Dynamic GMM yields a stronger positive composite association and uniformly positive pillar effects, suggesting static models understate benefits due to endogeneity and persistence. The central contribution of this paper lies in its reconceptualization of the ESG–bank financial stability relationship as fundamentally state‑ and capacity‑contingent. By demonstrating that ESG functions not as a universal remedy but as a conditional strategic asset that benefits financially robust institutions, and by revealing how pillar‑specific effects exhibit distinct shifts during systemic crises, this paper provides a novel dynamic framework that advances both theoretical understanding and the practical design of risk management and prudential supervision in an era of escalating global uncertainty.enCC BY Creative Commons Attribution 4.0. Internationalinfo:eu-repo/semantics/openAccessenvironmentálne - sociálne a riadiace faktoryESG faktoryESG factorsenvironmental - social and governance factorsfinančná stabilitafinancial stabilitybankybanksAltmanovo Z - skóreriadenie spoločnostimanažment rizíkrizikový manažmentriadenie rizíkrisk managementArticle