A New Approach to Sustainable Financial Stability and its Prospects

Abstract

Abstract In recent years attention has increasingly been drawn to factors that improve financial stability. The article systematizes the results of empirical scientific works which evaluate the influence of climate-related environmental factors, social factors, and factors related to the mechanisms of corporate governance (ESG) in terms of their contribution to financial stability. High ESG ratings, both within each group of factors and when they are taken as a whole, enhance the stability of the financial system. They do so both when viewed microprudentially, in reducing the aggregate individual risk of financial institutions, and when considered macroprudentially, in reducing their contribution to total systemic risk. However, there is noticeably more published work on the impact of environmental (climatic) factors and the role of corporate governance than on that social factors. At the end of this critical review of the relevant literature, possible directions for the development of this research are discussed.