The ESG practices–risk–financial performance linkage in emerging markets: A systematic review

Abstract

This article conducts a systematic review of peer-reviewed research published between 1995 and 2025 on the link between environmental, social, and governance (ESG) practices, risk, and financial performance in the context of emerging markets. Adopting a narrative, systematic hybrid approach and sourcing evidence primarily from ScienceDirect and Emerald Insight, the review synthesises empirical findings across multiple sectors, research designs, and regional settings. The consolidated evidence indicates that ESG integration generally enhances profitability and market valuation while lowering exposure to market, credit, and default risks. Risk mitigation consistently appears as the dominant pathway through which ESG practices contribute to improved financial outcomes, with governance quality emerging as the most influential ESG pillar. The financial contributions of environmental and social initiatives are found to be industry-specific, particularly within the banking, manufacturing, and energy sectors. Nevertheless, neutral or negative outcomes persist when ESG practices are symbolic, misaligned with strategy, or incurs substantial costs. Methodological inconsistencies, limited causal analysis, and uneven regional coverage especially in Africa and Latin America, constrain cross-study comparability. This review highlights the need for harmonised ESG practices, enhanced risk modelling, and broader geographic representation to strengthen the validity of future findings. Overall, the evidence supports the view that embedding ESG practices into corporate strategy enhances financial resilience, stakeholder confidence, and sustainable value creation in emerging markets.