This paper studies the association between ESG controversies and firm-level political risk. Utilising a sample of firms from G7 countries spanning the 2002-2021 period, encompassing 12,517 firm-year observations, we find a positive and significant relationship between firm-level political risk and ESG controversies. Our findings align with the moral disengagement perspective. We further identify that Paris agreement and global financial crisis moderate this relationship. Additionally, we report that the relationship is more pronounced in the absence of environmental initiatives. Overall, our study offers practical implications and contributes to the ESG and political risk literature.


Keywords: Firm-level political risk; ESG controversies; Moral disengagement theory; G7