Background Environmental, social, and governance (ESG) considerations have moved from a voluntary investor principle into binding disclosure law, a large market of rating providers, and an extensive literature on financial outcomes. These three developments are usually examined in separate fields, which leaves the connections between them poorly specified. This review asks what theoretical mechanisms connect ESG regulation, ESG ratings, and firm performance, and where in that chain the mechanisms weaken. Methods We conducted a structured, integrative review. From a reference corpus of 236 records, 5 duplicates were removed and 231 were screened; 157 met an ESG-relevance threshold and 55 sources were synthesised in depth, alongside primary regulatory documents. Sources were coded against five theories (stakeholder, legitimacy, institutional, agency, and signaling) and three themes (regulation and disclosure, ratings and measurement, and performance). Screening followed PRISMA principles, and the screening log, coding matrices, and proposition map are openly deposited. Results The literature describes a single causal chain. Regulation sets the supply of disclosure; rating intermediaries convert disclosure into scores that diverge for reasons of measurement and scope; and disclosure and ratings reach the market, where they relate to performance mainly through risk and the cost of capital. Greenwashing moderates every link, and assurance is the institutional check that restores a credible signal. We state the relationships as seven propositions and integrate them into one framework. Conclusions A disclosure mandate alone does not guarantee comparable information or a reliable market signal; verification is the lever that turns disclosure quantity into quality. The framework offers a shared structure for a fragmented field and a set of testable propositions for future empirical work.
Sidarta et al. (2026) studied this question.