The Role of ESG Mitigating Climate Risks within the Financial Sector

Abstract

The financial sector faces major challenges due to risks related to climate change that impact stability and performance. This study systematically reviews how ESG criteria mitigate these risks, with the aim of uncovering methodological factors that integrate ESG in sustainable financial economic risk management and enhance financial stability. This study uses systematic literature review methodology (SLR) to analyse studies relevant to the need for sustainable financial practice between 2019 and 2024, addressing the urgent need for sustainable financial practices, with a focus on reputable Scopus journal articles. Using the PECO framework to guide ESG research; ESG strategies improve climate risk mitigation and financial performance. Key aspects: transparency, green finance, integrated risk management, stakeholder engagement, internal policies, regulatory adaptation, collaboration. This study contributes to the existing literature by highlighting effective ESG integration strategies and providing valuable information to policy makers and financial institutions to improve sustainability and effectively manage climate risks.