Beyond green and gold

: a literary review of ESG score in academic research

Abstract

This narrative literature review examines the effects of Environmental, Social, and Governance (ESG) ratings on academic and corporate discussions on corporate social responsibility and sustainability. More and more, ESG numbers are used to judge how well a company is doing, especially regarding capital markets, firm size, growth, and how well the business is run. The findings indicate that ESG scores are good for capital markets because they increase the number of stocks available and lower the cost of capital, especially for businesses with high ESG scores. But there is only sometimes a straight link between doing well with ESG and making money. These effects are often lessened by factors unique to each business and how regulations are set up in different areas. Integrating ESG factors has significantly impacted developed markets with solid legal backing. However, in developing markets, the effects are sometimes more clear-cut because the regulatory systems are not as strong. Moreover, larger organizations have more resources to execute complete ESG procedures. However, the study shows that smaller companies can still significantly affect ESG issues by working on specific sustainable projects that are right for their size and the needs of their stakeholders. This shows that having access to resources is helpful, but planned ESG integration that aligns with group goals can help businesses of all kinds. According to the research, ESG ratings are linked to good corporate governance, including board diversity, transparency, and stakeholder involvement. Robust governance systems not only show that a company can handle economic downturns, but they also build long-term customer trust. Still, the fact that different rating agencies do not use the same ESG measures makes it harder to compare them and can lead stakeholders astray. In conclusion, ESG ratings are becoming more critical in sustainable business choices. However, metric standardization gaps prevent uniform evaluation across sectors and locations. The study's look into these connections adds to what academics and businesses already know about ESG's role in encouraging moral, financially sound, and socially responsible business practices.

Date of Award	24 Mar 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Luísa Anacoreta (Supervisor)