Sustainable Banking Disclosures, Credit Risk, and Profitability in Sub-Saharan Africa: A Sequential Explanatory SUR-ARDL Approach

Abstract

This study examines the implementation of the Bank of Ghana’s (BoG) Sustainable Banking Principles (SBPs) and the Ghana Stock Exchange (GSE) ESG Disclosure Guidance Manual, evaluating their impact on credit risk and financial performance in Ghanaian commercial banking. Adopting a sequential explanatory mixed-methods design, the paper compares GCB Bank PLC—Ghana’s premier indigenous bank—with Ecobank Ghana PLC, a leading pan-African subsidiary. Using quarterly panel data spanning 2018 to 2025 (32 quarters) alongside semi-structured interviews (N=12) with chief risk officers, financial controllers, and sustainability leads, the study analyzes the relationship between ESG compliance scores, non-performing loan (NPL) ratios, and Return on Equity (ROE). Anchored in Stakeholder, Legitimacy, and Signaling theories, dynamic System-GMM panel regression and polynomial regression specifications were estimated. The empirical findings demonstrate that higher ESG compliance significantly reduces credit default risk (β_1=-0.042,p<0.05), with multinational subsidiaries capturing risk reductions more rapidly than domestic entities. Furthermore, a non-linear (U-shaped) relationship between ESG compliance and ROE is confirmed, establishing an inflection threshold at an ESG compliance score of approximately 63.3%. The study highlights operational bottlenecks faced by financial accountants adapting to the ICAG and IFRS S1/S2 climate disclosure roadmaps and provides practical policy recommendations for regulators (BoG, SEC Ghana) and bank executives across emerging Sub-Saharan markets.