A Review of Recent Developments in ESG and Corporate Finance
Keywords:
sustainable finance, literature review, greenwashing, ESG ratings
Abstract
The rapid increase of Environmental, Social, and Governance (ESG) investing has given rise to a complex and often contradictory body of research. This review synthesizes the corporate finance literature on ESG by applying a unifying ’Value versus Values’ framework, which distinguishes between motivations driven by financial performance and those rooted in non-pecuniary preferences. We document a consensus that the ESG information ecosystem is fractured by divergent ratings and that the primary financial benefit of ESG lies in risk mitigation rather than consistent alpha generation. Furthermore, while evidence of widespread greenwashing highlights a significant gap between rhetoric and reality, we demonstrate that stakeholder pressure and mandatory disclosure regulations are compelling tangible changes in corporate investment, financing, and operational policies. By clarifying central debates and identifying critical gaps, this paper maps the current state of knowledge and charts a course for future research focused on causality, measurement, and policy effectiveness.
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References
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2. Joe J.R. Be the thought leaders! The Accounting Review. 2023;98(1):479–489. https://doi.org/10.2308/TAR-2022-0559
3. Edmans A., Kacperczyk M. Sustainable finance. Review of Finance. 2022;26(6):1309–1313. https://doi.org/10.1093/rof/rfac069
4. Dechow P.M. Understanding the sustainability reporting landscape and research opportunities in accounting. The Accounting Review. 2023;98(5):481–493. https://doi.org/10.2308/TAR-2023-0145
5. Christensen D.M., Serafeim G., Sikochi A. Why is corporate virtue in the eye of the beholder? The case of ESG ratings. The Accounting Review. 2022;97(1):147–175. https://doi.org/10.2308/TAR-2019-0506
6. Pástor L., Stambaugh R.F., Taylor L.A. Sustainable investing in equilibrium. Journal of Financial Economics, 2021;142(2):550–571. https://doi.org/10.1016/j.jfineco.2020.12.011
7. Pedersen L.H., Fitzgibbons S., Pomorski L. Responsible investing: The ESG- efficient frontier. Journal of Financial Economics. 2021;142(2):572–597. https://doi.org/10.1016/j.jfineco.2020.11.001
8. Baker S., Hollifield B., Osambela E. Asset prices and portfolios with externalities. Review of Finance. 2022;26(6):1433–1468. https://doi.org/10.1093/rof/rfac065
9. Zerbib O.D. A sustainable capital asset pricing model (S-CAPM): Evidence from environmental integration and sin stock exclusion. Review of Finance. 2022;26(6):1345–1388. https://doi.org/10.1093/rof/rfac045
10. Alves R., Krüger P., Van Dijk M. Drawing up the bill: Are ESG ratings related to stock returns around the world? Journal of Corporate Finance. 2025;93:102768. https://doi.org/10.1016/j.jcorpfin.2025.102768
11.Ahn B.H., Patatoukas P.N., Skiadopoulos G.S. Material ESG alpha: A fundamentals-based perspective. The Accounting Review. 2024;99(4):1–27. https://doi.org/10.2308/TAR-2022-025612. Ciciretti R., Dalò A., Dam L. The contributions of betas versus characteristics to the ESG premium. Journal of Empirical Finance. 2023;71:104–124. https://doi.org/10.1016/j.jempfin.2023.01.004
13. Chava S., Kim J.H.J., Lee J. Risk, return, and environmental and social ratings. Journal of Corporate Finance.2025;92:102744. https://doi.org/10.1016/j.jcorpfin.2025.102744
14. Dumitrescu, A., Zakriya, M., 2021. Stakeholders and the stock price crash risk: What matters in corporate social performance? Journal of Corporate Finance 67 101871.
.15. Hoepner A.G., Oikonomou I., Sautner Z., et al. ESG shareholder engagement and downside risk. Review of Finance. 2024:28(2):483–510. https://doi.org/10.1093/rof/rfad034
16. Giglio S., Maggiori M., Stroebel J., et al. Four facts about ESG beliefs and investor portfolios. Journal of Financial Economics. 2025;164:103984. https://doi.org/10.1016/j.jfineco.2024.103984
17. Stroebel J., Wurgler J. What do you think about climate finance? Journal of Financial Economics. 2021;142(2):487–498. https://doi.org/10.1016/j.jfineco.2021.08.004
18. Bonnefon J.-F., Landier A., Sastry P., et al. The moral preferences of investors: Experimental evidence. Journal of Financial Economics. 2025;163:103955. https://doi.org/10.1016/j.jfineco.2024.103955
19. Seifert M., Spitzer F., Haeckl S., et al. Can information provision and preference elicitation promote ESG investments? Evidence from a large incentivized online experiment. Journal of Banking & Finance. 2024;161:107114. https://doi.org/10.1016/j.jbankfin.2024.107114
20. Filippini M., Leippold M., Wekhof T. Sustainable finance literacy and the determinants of sustainable investing. Journal of Banking & Finance. 2024;163:107167. https://doi.org/10.1016/j.jbankfin.2024.107167
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Published
2026-04-26
How to Cite
JiaD., YangT. and WuK. (2026) “A Review of Recent Developments in ESG and Corporate Finance”, Journal of Corporate Finance Research / Корпоративные Финансы | ISSN: 2073-0438, 20(1), pp. 6-22. doi: 10.17323/j.jcfr.2073-0438.20.1.2026.6-22.
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