SUSTAINABILITY INVESTMENTS AND FINANCIAL PERFORMANCE OF COMMERCIAL BANKS IN KENYA
Caroline Njeri Gakinya - Post Graduate Student, Department of Accounting and Finance, Kenyatta University, Kenya
Dr. James Gatauwa (PhD) - Senior Lecturer, Department of Accounting and Finance, Kenyatta University, Kenya
ABSTRACT
Over recent decades, sustainability investments and corporate social responsibility (CSR) have gained prominence, yet their financial implications for Kenyan commercial banks remain underexplored. This study examined the relationship between four CSR initiatives Education, Health Programs, Economic Empowerment, and Environmental Investments and Return on Equity (ROE). Using an exploratory design and secondary data from annual reports, correlations and regressions were conducted in SPSS at a 95% confidence level. Findings revealed that education-related investments had a strong, statistically significant positive effect on ROE (r = 0.561, p < 0.001), aligning with evidence that education enhances human capital, community well-being, and brand reputation. Environmental investments also showed significant positive associations with ROE, underscoring their cost-reduction and market-positioning benefits. Conversely, health program investments exhibited a weak, statistically insignificant relationship with ROE, potentially reflecting the long-term nature of healthcare returns. Economic empowerment initiatives similarly showed positive but insignificant effects, suggesting delayed financial impact despite strong social value in Kenya’s high-unemployment context. Policy recommendations emphasize prioritizing education to address skills gaps, supported by collaboration between banks, businesses, and educational institutions, as well as tax incentives for CSR. Environmental sustainability should be advanced through regulations and incentives promoting energy efficiency and waste management. While health and economic empowerment programs may not yield immediate financial gains, their broader societal benefits enhanced productivity, poverty reduction, and community stability justify continued investment. This study contributes empirical evidence from a developing-economy perspective, highlighting education and environmental sustainability as strategic levers for both financial performance and societal progress in Kenya’s banking sector.