Evaluating sustainability credibility in financial institutions using ESG talk and ESG action indicators

Abstract

The strategic significance of sustainability disclosures in financial markets has been heightened by the institutionalization of environmental, social, and governance (ESG) reporting. Nevertheless, there are ongoing apprehensions about the extent to which ESG communication accurately reflects the substantive sustainability outcomes. In this study, ESG credibility is operationalized as the degree of alignment between ESG Talk, representing a signaling-oriented ESG assessment layer, and ESG Action, representing an outcome-oriented ESG assessment layer. Both layers are constructed from Refinitiv ESG indicators; therefore, the framework does not directly verify individual corporate claims against specific realized actions but evaluates the consistency between two analytically distinct ESG assessment profiles. The results reveal persistent differences between signaling-oriented and outcome-oriented ESG assessments, suggesting that disclosure- and governance-intensive ESG evaluations may not always coincide with assessments that place greater emphasis on observable sustainability outcomes. The study makes a valuable contribution to the field of ESG strategy and sustainability assessment by introducing ESG credibility as an alignment-based construct and operationalizing it through a transparent decision-analytic framework. The results offer novel insights for financial institutions, regulators, and investors who are interested in assessing the reliability of ESG signals and enhancing the strategic credibility of sustainability commitments.