This research paper examines the impact of environmental accounting on the risk-adjusted financial performance of commercial banks in emerging economies. As sustainability concerns grow, financial institutions are increasingly integrating environmental considerations into their accounting practices. This study employs a mixed-methods approach, combining quantitative analysis of financial data and qualitative interviews with banking professionals to assess how environmental accounting practices influence risk management and overall financial performance. Findings indicate that banks implementing robust environmental accounting frameworks experience enhanced risk-adjusted returns, driven by improved stakeholder trust, regulatory compliance, and operational efficiencies. Furthermore, the study highlights the role of environmental disclosures in reducing perceived risks among investors, leading to lower capital costs. The paper concludes that adopting environmental accounting not only aligns banks with global sustainability goals but also serves as a strategic tool for enhancing financial stability and competitiveness in emerging markets. Recommendations for policymakers and banking institutions are provided to foster the integration of sustainable practices within the financial sector.