Directors' Experience and Firm Performance: A Study on Asian Banks

The financial system plays a critical role in shaping any economy, having a huge impact in this highly interconnected globalized world. When this system operates properly, the savings are directed toward investments that improve living standards; when it fails, as it has in recent years, savings are directed toward real estate bubbles and environmentally harmful projects, including those that exacerbate human-induced climate change (Sachs, 2014). To address this pressing need, the United Nations Environment Program-Finance Initiative (UNEP-FI) issued the Principles of Positive Impact Finance in 2017 and the Principles for Responsible Banking in 2019 . Banks started adopting them, realizing the far-reaching impact on their survival and the society at large. When individuals perceive that banks are making funding decisions that are not in the public's best interests, their confidence in them is weakened (Adams, 2021).
Hence, a deeper understanding of the dynamics underlying ESG disclosure and the action of both borrowers and banks will help reveal the role of financial institutions in promoting the broader sustainability principles of UNEP-FI. Drawing the individual loan level sample across the world from the LPC DealScan Database, this study will investigate the impact of sustainability on the terms of loan contracts, whether sustainability disclosure is preferred over action, and whether board-level sustainability committees matter in loan contracts with the lending banks compared to less sustainable peers.