A Review on the Impact of ESG on the Economy and Financial Risk

This study employed Scopus, Web of Science, and Google Scholar databases to review the latest research articles on the influence of environmental, social, and governance (ESG) factors on economic dynamics and financial risk and address major challenges associated with this highly researched topic. With a blend of systematic literature review and bibliometric techniques, this study highlights seven hundred and fifty-five texts and classified them into four main topics about the impact of ESG Measures on Credit Ratings (238 articles), Economic Growth (153 articles), Corruption Risk (58 articles), and Sustainable Banking (306 articles). Among the main results, findings suggest that credit rating related to ESG performance could influence customer behavior for better access to credit and fostering socially responsible behavior, which includes building strong internal controls and anti-corruption policies. Additionally, a significant correlation between GDP and CO2 emissions has been confirmed, and it has been concluded that countries' sustainability improvements could be expected to have a net positive effect on economic prosperity. The content analysis identified research gaps in this field, such as which ESG pillar impacts credit ratings, how ESG can affect economic growth, how to conduct corruption risk management strategies, and what measures financial institutions should take to promote sustainability without harming the sector.