The effect of the environmental pillar on the financial performance of financial institutions in Cameroon

Abstract

The global stage in the contemporary era has championed financial performance issues in business policies for the survival of financial institutions. This paper explores the impact of environmental compliance expectations on the financial performance of financial institutions in Cameroon, highlighting the importance of sustainability in business strategies. Consequently, the main objective of this study is concerned with how the Environmental Pillar-EP (Emissions reduction, Resource reduction and Product innovation) influences the financial performance of financial institutions in Cameroon. From 418 registered and accredited financial institutions in Cameroon, 262 observations were selected using the snowball sampling technique based on cross-sectional data from questionnaires. The Cronbach Alpha and test-retest reliability were used to assess the questionnaire's reliability. Data was analyzed using the Maximum Likelihood Estimation Technique of Structural Equation Modeling with Principal Component Analysis as a variable reduction strategy. The findings revealed that the environmental pillar positively and significantly affects the financial performance of financial institutions in Cameroon at a 99% confidence level. Though the emissions reduction, resource reduction, and product innovation all had a positive effect, only the effect of emission reduction was significant at 1%. Therefore, to redefine key elements of the environmental pillar, policy recommendations were put forth with particular attention on meeting emission reduction strategies in the area of containing greenhouse gases and related climate degradation subjects either within the financial institutions or externally through the projects they fund. Therefore, some slack resources should be invested in promoting the emission reduction process either individually or in collaboration with all stakeholders of financial institutions as explained in the slack resource, resource dependency, stakeholder, and modern portfolio theories.