The impact of ESG-factors on financial stability

An increasing attention has been riveted recently on so called ESGfactors impacting financial stability. This paper provides a systematic review of the empirical studies which assess the impact of environmental (climatic), social factors as well as various aspects related to corporate governance on financial stability. Overall, higher ESG-rankings, both aggregate and in terms of the three pillars (E, S, G), tend to enhance the financial system stability from the microand macroprudential perspective by mitigating aggregate individual risk of financial institutions and the contribution to systemic risk, respectively. Nonetheless, the research intensity within the ESG pillars differs substantially. There are significantly more studies investigating the impact of environmental and corporate governance factors then tackling the effects of social ones. This literature review is closed with the discussion of possible directions for future investigation in the given research program.