When Does ESG Create Value? A Literature Review on Benefits, Credibility, and Enabling Factors

The integration of environmental, social and governance (ESG) criteria into corporate and financial decision-making has become one of the most significant transformations in today’s financial markets. Growing regulatory pressure, stakeholder expectations and increased awareness of sustainability challenges have led companies and investors to incorporate ESG considerations into strategic and investment decisions. Despite the rapid spread of ESG practices, the academic literature presents conflicting and sometimes contradictory evidence regarding their economic implications and practical effectiveness. This article provides a review of the literature on the main academic contributions to ESG integration, focusing on three key dimensions: the economic benefits associated with ESG practices, the methodological and credibility challenges relating to ESG measurement, and the organisational and technological factors that enable effective ESG implementation. The findings indicate that ESG integration is generally associated with positive organisational outcomes, including improved financial performance, lower cost of capital, greater stakeholder trust and a reduction in firm-specific risk. However, the realisation of these benefits is not automatic and depends to a large extent on the credibility of ESG practices and information. Rather than endorsing the widely held view that ESG criteria are inherently capable of creating value, the analysis shows that the value-creating effect of ESG criteria depends crucially on the credibility of ESG practices and the quality of their implementation. The literature highlights significant methodological challenges, including rating divergence, the lack of standardised metrics, methodological opacity and the growing risk of greenwashing, which can undermine the reliability of ESG information. This paper proposes an deductive conceptual framework in which ESG effectiveness emerges from the interaction between value creation mechanisms, credibility constraints, and enabling organisational and technological factors.