Environmental, Social, and Governance (ESG) investing has grown rapidly in the global financial market. It began as an ethical approach to investment but is now being implemented by investors across the board to maximize financial returns as well as to support ethical business practices. However, the research findings on ESG performance are not always consistent. Many studies also are raising concerns about how ESG is measured and reported. This systematic review explores the development of ESG investing and how it is related to financial performance, and the major challenges of ESG measurement. The review is based on the PRISMA guidelines for a transparent and structured process. Relevant studies were collected from the major academic databases such as Scopus, Web of Science, Google Scholar and SSRN. Peer-reviewed articles published in the period 2010-2025 were screened, according to well-defined inclusion and exclusion criteria. The studies chosen were analyzed, following a thematic approach, in order to identify the key trends and debates in ESG literature. The results show that the use of ESG investing has gained popularity as a result of demand from investors, government regulations and corporate sustainability efforts. Many studies find positive impacts of ESG on firm performance and risk reduction, and others weak or mixed results. A major problem found is the inconsistency between ESG rating agencies. Different scoring methods provide different results in ESG which makes the result less reliable and there is a risk of greenwashing. The review points to key areas where ESG research is lacking, in particular the lack of agreed-upon measurement systems, evidence of long-term financial impact, and more research into emerging markets. Future research should design clearer ESG metrics, employ new technologies for data analysis, and test ESG performance over longer time periods.
