A Literature Review: The Interplay of Risk Profile and Digital Banking in Driving Sustainable Finance

Abstract

The growing global emphasis on sustainability has reshaped the financial sector, requiring institutions to integrate environmental, social, and governance (ESG) factors into decision-making while adapting to rapid digital transformation. This study conducted a literature review of research published between 2017 and 2024 to examine how risk profile management and digital banking collectively contribute to the advancement of sustainable finance. By synthesizing findings from peer-reviewed journals, the review identified key patterns in how risk governance and digital innovation interact to support financial resilience, transparency, and inclusion. The analysis revealed that effective risk profile management enhances financial stability and enables banks to allocate resources to sustainable projects, while digital banking drives efficiency, strengthens accountability, and expands access to financial services. Evidence also suggests that sustainability practices are positively associated with financial performance, with firm risk acting as a mediator in some contexts. However, the review highlights persistent challenges, including the role of credit risk in impacting firm value and the emergence of new risks such as cybersecurity and data privacy in the digital banking environment. These findings provide practical insights for regulators and practitioners seeking to design risk governance frameworks and digital infrastructure that support ESG objectives. Future research is encouraged to expand this discussion by exploring governance mechanisms, macroeconomic factors, and cross-country comparisons to further enhance understanding of sustainable finance in various institutional contexts.