Erdal DEMİR / EVALUATION OF ESG RISKS IN THE BANKING INDUSTRY THROUGH AN INTEGRATED DECISION-MAKING FRAMEWORK

Abstract

This manuscript develops and applies a hybrid multi-criteria decision-making (MCDM) framework for the systematic assessment of Environmental, Social, and Governance (ESG) risks within the Turkish banking industry. The recommended framework combines the CRISUS objective weighting technique, which quan tifies the relative importance of ESG risk criteria, with the Proximity Indexed Value (PIV) ranking algorithm, which enables stable and rank reversal-free prioritization of bank alternatives. The empirical analysis is conducted on major commercial banks included in the Borsa İstanbul Sustainability Index. The outcomes derived from the CRISUS procedure indicate that environmental and governance-related risks dominate the ESG risk structure of Turkish banks, reflecting heigh tened regulatory requirements and systemic exposure, whereas social risk criteria display relatively weaker discriminatory capacity. The application of the PIV algorithm yields a clear and interpretable ranking of bank alternatives, with Yapı Kredi identified as the most resilient institution, followed by Halkbank and İş Bank, all of which exhibit close proximity to the ideal ESG risk profile. Additional sensitivity and comparative analyses confirm the robustness and reliability of the proposed hybrid framework. Overall, this research contributes to the existing literature by introducing one of the limited number of integrated ESG risk assessment models tailored to an emerging market setting. Beyond its methodological contribution, the framework offers practical decision-support insights for regulators, investors, and bank managers seeking to benchmark ESG risk exposure and enhance resili ence within the banking industry.

Keywords

ESG risk assessment, Turkish banking industry, Risk management, Sustainable finance, MCDM.

JEL Classification

C54, G17, G22, G32, G41.

How to cite this article: Demir, E. (2025). Evaluation of Esg Risks in the Banking Industry Through an Integrated Decision-Making Framework. International Journal of Insurance and Finance, 5(2), 63-80. https://doi.org/10.52898/ijif.2025.10