The Integration of Enterprise Risk Management (ERM) and Environmental, Social and Governance (ESG) Factors

Mingyang Chang

doi:10.6981/FEM.202409_5(9).0018

Authors

Mingyang Chang

DOI:

https://doi.org/10.6981/FEM.202409_5(9).0018

Keywords:

Enterprise Risk Management (ERM); ESG Performance; Empirical Analysis; Integration.

Abstract

As the world deepens its understanding of sustainable development and corporate social responsibility, the ESG framework has become an important tool for assessing the comprehensive performance of companies. The effective integration of ESG factors into the risk management process and how this integration improves overall corporate performance are understudied. This study uses the ESG rating scores of Chinese listed companies and financial and market performance data of companies listed on the A-share market to empirically analyze the impact of corporate ESG performance on corporate risks. The study found that companies actively improving ESG performance can significantly improve their ability to withstand financial and market risks, and this conclusion still holds true after fully considering endogeneity issues such as variable measurement errors. Based on this research finding, this study recommends that the government vigorously promote the positive role of ESG information disclosure on enterprises and society, standardize and strengthen ESG information disclosure requirements, and recommend that companies substantively disclose ESG information, provide policy guarantees for corporate ESG practices, and simultaneously improve awareness of corporate sustainable development concepts.

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