Aspects of assessing the financial performance of commercial banks in Armenia within the scope of ESG

Abstract

This study examines the relationship between financial performance and ESG (Environmental, Social, and Governance) practices within Armenia’s banking sector. Focusing on Ardshinbank, Ameriabank, and ACBA Bank over the 2017–2024 period, the research employs a mixed-method approach combining traditional financial metrics (ROA, ROE, NIM, C/I) with advanced tools such as Multi-Criteria Decision Analysis and regression modeling. The findings reveal that banks with stronger ESG integration exhibit enhanced financial resilience, improved cost efficiency, and more stable long-term profitability. Notably, high governance scores are associated with stronger dividend policies and increased free cash flow. The results demonstrate that ESG is not merely a compliance framework but a driver of competitive advantage, particularly in emerging markets. The study underscores the necessity of embedding ESG indicators into standard performance assessments and highlights their growing role in attracting international funding. As Armenia’s financial institutions adapt to sustainability trends, ESG-aligned strategies may significantly enhance market positioning, stakeholder trust, and risk mitigation. These insights offer practical implications for bank executives and policymakers seeking to align financial goals with sustainable development priorities.