The ESG–Democracy Interface

Abstract

This paper examines the relationship between democratic quality and Environmental, Social, and Governance (ESG)-related governance through a comparative legal-institutional approach. It challenges the assumption that democratic principles commonly associated with ESG necessarily translate into coherent governance outcomes. To this end, the study combines the five democracy indices developed by the Varieties of Democracy (V-Dem) Project—Polyarchy, Liberal Democracy, Participatory Democracy, Egalitarian Democracy, and Deliberative Democracy—with three governance indicators from the World Bank's Worldwide Governance Indicators (WGI): Government Effectiveness, Regulatory Quality, and Control of Corruption. Based on a comparative analysis of ten countries, the findings demonstrate that distinct democratic dimensions interact differently with specific governance functions. Liberal and deliberative democracy exhibit stronger alignment with regulatory quality and institutional integrity, whereas participatory and egalitarian democracy produce more heterogeneous effects on administrative capacity and regulatory coherence. The study concludes that democratic legitimacy and ESG governance are not functionally equivalent concepts, highlighting the need for a differentiated institutional understanding of the legal conditions required for sustainable governance.