Corporate Governance Sustainability Regulation: The Impact of Sustainability Competencies on ESG Ratings - An Exploratory Study of European and Japanese Banks

Global lawmakers and standard setters, e.g., the International Sustain-ability Standards Board (ISSB) as well as many other countries in the world, such as Europe and Japan are continuously shaping their regulatory frameworks in the area sustainability with a strong focus on environmental disclosures and with cor-porate governance being a rather deprioritized area. This study examines if the number of board directors with sustainability expertise and sustainability leader-ship has a positive effect on the ESG ratings of EURO STOXX Banks and Japa-nese TOPIX Banks. Results indicate that sustainability expertise on boards of European and Japanese banks is still rather low, but that sustainability leadership with Japanese banks is relatively high. Nevertheless, ESG ratings of Japanese banks are rather low and much lower than those of their European peers.