Assessing the importance of ESG derivatives in Corporate Risk Management

In the context of increasingly developing sustainable finance, environmental, social, and governance (ESG) factors have become an important pillar in corporate strategy. In parallel with traditional derivatives, the emergence of ESG derivatives opens up a new approach, both serving the goal of financial risk prevention and linking business activities with the commitment to sustainable development. This study focuses on assessing the extent to which ESG derivatives can support businesses in risk management. First, the thesis presents the theoretical basis of derivatives and the formation of ESG products such as sustainability-linked swaps, ESG-linked CDS, exchange-traded derivatives based on ESG indexes, and carbon contracts. Then, the study analyzes and compares with traditional risk prevention tools, clarifying the dual role of ESG derivatives in minimizing financial risks while strengthening the trust of stakeholders. The case study of Enel demonstrates how businesses can embed sustainability KPIs into derivatives, turning risk management into a channel for implementing a specific ESG strategy. In addition to qualitative analysis, the study also uses panel data from 2019 to 2022 to examine the impact of ESG derivatives on corporate performance and risk. The results show that these tools have not clearly demonstrated the ability to reduce volatility or directly improve ESG scores, but have a positive relationship with profitability and transparency. From there, it can be affirmed that ESG derivatives, although still in their infancy, have become a potential direction, contributing to the completion of the corporate risk management framework and promoting the transition to a sustainable economy.