Answer is definitely YES... Environmental, Social, and Governance ( ESG ) factors can create systematic risk when they affect the broader market or economy, not just individual firms. Here’s how it happens: 🧩 1. Mechanisms: How ESG Creates Systematic Risk a. Environmental (E) Climate change can lead to extreme weather events , resource scarcity, and regulatory shifts (like carbon pricing). These changes impact entire sectors (energy, agriculture, insurance) and supply cha