Factors influencing the multinational banks’ decisions to curtail operations in russia: Does ESG matter?

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The paper is devoted to an under-researched topic of the international business community’s reaction to russia’s armed aggression against Ukraine. It aims to evaluate how G7 and EU financial sanctions, institutional pressure, ESG ratings, and asset value of multinational banks in russia influence their decisions to reduce activities in the invading country. The study used the Yale CELI database of companies leaving and staying in Russia for the classification tree method. The results show that none of the banks headquartered in G7 and EU member states that had no or relatively little assets in russia before the invasion are doing business there on a pre-war scale. Unlike banks headquartered in other countries, most either curtailed their presence in that market or exited the market. This indicates that financial sanctions imposed by G7 and EU member states and institutional pressure on banks in these countries to withdraw from the russian market have proven effective to a certain extent. However, these factors do not meaningfully influence the business of multinational banks with significant assets in russia. The study has not confirmed the hypothesis that a bank with higher ESG ratings is more likely to curtail its operations in the market of an aggressor country and withdraw. However, nearly all banks that scaled back significant activities or even pulled out of russia have better ESG indicators than the industry average. The results suggest the feasibility of improving the methodologies of ESG rating providers for accurately measuring business reactions to aggression and war crimes.

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    • Figure 1. The classification tree built on two classification features
    • Figure 2. The classification tree after analyzing the influence of ESG and SDG ratings
    • Table 1. Classification tree structure (the S&P Global ESG Score variable is added)
    • Conceptualization
      Heorhiy Rohov, Oleh Kolodiziev
    • Formal Analysis
      Heorhiy Rohov, Ihor Krupka, Markiian Zaplatynskyi
    • Methodology
      Heorhiy Rohov, Svitlana Yehorycheva
    • Validation
      Heorhiy Rohov
    • Writing – review & editing
      Heorhiy Rohov, Svitlana Yehorycheva, Ihor Krupka
    • Project administration
      Oleh Kolodiziev
    • Resources
      Oleh Kolodiziev, Svitlana Yehorycheva, Ihor Krupka, Markiian Zaplatynskyi
    • Visualization
      Oleh Kolodiziev
    • Writing – original draft
      Oleh Kolodiziev, Markiian Zaplatynskyi
    • Data curation
      Svitlana Yehorycheva
    • Supervision
      Svitlana Yehorycheva
    • Funding acquisition
      Ihor Krupka, Markiian Zaplatynskyi
    • Software
      Ihor Krupka
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