This article examines how board characteristics and home-country climate policies shape banks’ environmental, social, and governance (ESG) controversy performance, using a sample of 415 listed banks in the USA, the UK and the European Union over 2015–2024. Combining fractional logit, panel logistic regressions and system generalized method of moments estimations to address bounded response variables, rating transitions and endogeneity issues, we show that corporate social responsibility committees and gender-diverse boards significantly improve both environmental and social outcomes. Board retirement and meeting exert a positive influence only on environmental performance, while board independence exhibits heterogeneous effects across sustainability dimensions. More stringent climate policies are associated with higher environmental outcomes, fewer ESG controversies and a greater likelihood of upward ESG rating transitions, highlighting the central role of corporate governance in bank sustainability. Overall, these findings highlight the multidimensional role of corporate governance in strengthening banks’ sustainability performance.
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