EVALUATION OF ESG RISKS IN THE BANKING INDUSTRY THROUGH AN INTEGRATED DECISION-MAKING FRAMEWORK

Özet

This manuscript develops and applies a hybrid multicriteria decision-making (MCDM) framework for the systematic assessment of Environmental, Social, and Governance (ESG) risks within the Turkish banking industry. The recommended framework combines the CRISUS objective weighting technique, which quantifies the relative importance of ESG risk criteria, with the Proximity Indexed Value (PIV) ranking algorithm, which enables stable and rank-reversal-free prioritization of bank alternatives. The empirical analysis is conducted on major commercial banks included in the Borsa İstanbul Sustainability Index. The outcomes derived from the CRISUS procedure indicate that environmental and governance-related risks dominate the ESG risk structure of Turkish banks, reflecting heightened regulatory requirements and systemic exposure, whereas social risk criteria display relatively weaker discriminatory capacity. The application of the PIV algorithm yields a clear and interpretable ranking of bank alternatives, with Yapı Kredi identified as the most resilient institution, followed by Halkbank and İş Bank, all of which exhibit close proximity to the ideal ESG risk profile. Additional sensitivity and comparative analyses confirm the robustness and reliability of the proposed hybrid framework. Overall, this research contributes to the existing literature by introducing one of the limited number of integrated ESG risk assessment models tailored to an emerging market setting. Beyond its methodological contribution, the framework offers practical decision-support insights for regulators, investors, and bank managers seeking to benchmark ESG risk exposure and enhance resilience within the banking industry.

Abstract

This manuscript develops and applies a hybrid multicriteria decision-making (MCDM) framework for the systematic assessment of Environmental, Social, and Governance (ESG) risks within the Turkish banking industry. The recommended framework combines the CRISUS objective weighting technique, which quantifies the relative importance of ESG risk criteria, with the Proximity Indexed Value (PIV) ranking algorithm, which enables stable and rank-reversal-free prioritization of bank alternatives. The empirical analysis is conducted on major commercial banks included in the Borsa İstanbul Sustainability Index. The outcomes derived from the CRISUS procedure indicate that environmental and governance-related risks dominate the ESG risk structure of Turkish banks, reflecting heightened regulatory requirements and systemic exposure, whereas social risk criteria display relatively weaker discriminatory capacity. The application of the PIV algorithm yields a clear and interpretable ranking of bank alternatives, with Yapı Kredi identified as the most resilient institution, followed by Halkbank and İş Bank, all of which exhibit close proximity to the ideal ESG risk profile. Additional sensitivity and comparative analyses confirm the robustness and reliability of the proposed hybrid framework. Overall, this research contributes to the existing literature by introducing one of the limited number of integrated ESG risk assessment models tailored to an emerging market setting. Beyond its methodological contribution, the framework offers practical decision-support insights for regulators, investors, and bank managers seeking to benchmark ESG risk exposure and enhance resilience within the banking industry.

Yazarlar

Erdal DEMİR

Anahtar Kelimeler

ESG risk assessment, Turkish banking industry, Risk management, Sustainable finance, MCDM

JEL Codes

C54, G17, G22, G32, G41

Yayın Bilgileri

Cilt 5, Sayı 2, 2025 · Sayfa 63-80

DOI: 10.52898/ijif.2025.10

Dosyalar