THE ROLE OF ESG FACTORS IN FORMING FINANCIAL RISK MANAGEMENT STRATEGIES IN GLOBAL MARKETS

Abstract

The article provides a comprehensive scientific analysis of the role of ESG factors (Environmental, Social, Governance) in the formation of financial risk management strategies in global financial markets in the context of growing economic instability, increased regulatory pressure and transformation of financial intermediation models. It is substantiated that the current stage of development of the global financial system is characterized by a shift in emphasis from short-term financial efficiency to long-term sustainability, where environmental, social and governance factors are important determinants of the level of financial risks and the stability of financial institutions. It is proven that ignoring ESG factors leads to the accumulation of hidden risks, in particular credit, investment, reputational and systemic risks, which can be realized in the form of significant financial losses in the medium and long term. The study analyzes the evolution of approaches to financial risk management in the context of sustainable development and shows that ESG factors are gradually transforming from non-financial indicators into full-fledged elements of the risk management system. The mechanisms of influence of environmental risks related to climate change, environmental standards and “green” regulation on the value of assets and creditworthiness of borrowers are revealed. Special attention is paid to social risks arising from violations of labor rights, social responsibility of business and reduced trust from stakeholders, as well as management risks caused by the quality of corporate governance, transparency of decision-making and adherence to the principles of integrity. The specifics of integrating ESG factors into the financial risk management strategy of banks and financial institutions are studied, in particular in terms of credit policy, assessment of the value of collateral, management of investment portfolios and formation of internal risk control systems. It is substantiated that the development of green banking and ESG-oriented financing contributes to reducing long-term risks and at the same time increases the competitiveness of financial institutions in global markets. It is shown that the implementation of ESG strategies allows transforming risk management from a reactive tool for minimizing losses into a proactive mechanism for preventing financial crises. The article pays special attention to the role of ESG factors in times of crisis and martial law, when financial risks are exacerbated by macroeconomic imbalances, reduced solvency of economic entities and increased social tension. It is substantiated that adherence to the principles of social responsibility, effective corporate governance and transparency of financial activities are important factors in supporting financial stability and trust in the financial system in a period of increased uncertainty.