The Green Trilemma: Energy Efficiency, Banking Stability and Climate Risk in the ESG Context at World Level

Abstract In the following article, we analyse the relationships among banking stability, the efficiency of the energy system and climate risks at a global level. We present a detailed analysis of the literature relating to the relationship between the banking system and Environmental, Social and Governance-ESG models. In our research, we try to verify whether it is possible to achieve energy efficiency, stability of the banking system and reduction of climate risk together i.e. the “Green Trilemma”. The econometric analysis is conducted through the following models: Panel Data with Random Effects, Panel Data with Fixed Effects, Pooled Ordinary Least Squared and Weighted Least Squared-WLS. To estimate the variables we used World Bank data. The analysis shows that ESG growth is negatively associated with energy efficiency and positively associated with banking stability and climate risk. It therefore follows that the Green Trilemma hypothesis is rejected. Countries can only target banking stability and climate risk through ESG models. JEL Code: G21, Q43, Q47, Q51, Q54.