Does ESG shape systemic risk in oil and gas exploration?

This paper examines the influence of ESG factors on the systemic risk of oil and gas companies using firm-level data from 2004 to 2024. We find that firms with high (low) ESG scores consistently contribute less (more) to systemic risk. This effect is stronger among large, high-emission firms. The relationship between ESG and systemic risk is non-linear, with diminishing benefits beyond a certain ESG threshold—where further ESG improvement may increase systemic risk. During the 2014–2016 oil price collapse, firms with stronger ESG profiles contribute less to systemic risk. These findings underscore the role of corporate sustainability in mitigating sector-wide financial vulnerabilities.