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AbstractThe diffusion of Environmental, Social and Governance (ESG) metrics is increasingly affecting corporates behaviour and their ability to attract investors. Corporate ESG practices are nowadays considered as a key element in evaluating creditworthiness and the cost of capital, to direct funds to the best‐performing companies that limit the harmful impact on the planet and the societies. Due to this increased interest in ESG by companies, investors and policymakers, a high number of ESG scores and metrics have been developed, each with different methodologies and scopes. Because of this variety, it could be therefore challenging for investors to understand and compare ESG measures. In this paper, we address this issue by proposing a method to combine the information provided by different ESG scores into a single aggregate measure of company sustainability and link this combined score to the credit rating of companies. The proposed methodology can help investors to improve their investment decisions by combining more diverse information on company sustainability as a driver of companies' credit rating, thereby reducing information asymmetries.

AbstractEnvironmental, Social and Governance (ESG) issues have become particularly relevant in the agendas of policymakers, investment decisions by companies and asset allocation process of investors. However, the transition to a greener and more sustainable economic system is not without risks. The literature has investigated the relationship between ESG and risk in different ways, through multiple perspectives and approaches. We select all documents with "ESG" and "Risk" in the title, abstracts and keywords available in Scopus and, after removing non‐relevant papers, we are left with a sample of 589 documents published in the period 1983–2022. To provide a view of the most important studies, we also focus on the most cited documents to discuss the methodological approaches and main results. The results show that over time, ESG has gained increasing attention from the literature, but researchers work in isolation and there is no single approach or leading core topic driving academic productivity; a clear taxonomy of ESG risks appears to be missing. To the best of our knowledge, this paper is the first to discuss research on ESG and risk from a financial perspective. The results highlight some existing gaps in the literature that can provide a hint for the development of the topic by researchers. These include a clearer taxonomy of ESG risks that can affect investors' and companies' decisions, a greater effort to evaluate how ESG risks distribute and spill from one sector to another and the inclusion of emerging economies and small and medium‐sized enterprises in the samples.