Identifying ESG Risk Signals Through Financial Statements: Evidence from Bulgarian Listed Companies

The growing importance of identifying environmental, social and governance (ESG) risks is driven by increasing regulatory requirements and stakeholder expectations. However, information asymmetry, disclosure–performance gaps and potential greenwashing may limit the reliability of sustainability disclosures. This study examines the potential of financial statements as an additional source for screening ESG risk exposures and proposes an ESG Proxy Mapping Approach based on financial statement indicators. The empirical analysis covers companies listed on the Bulgarian Stock Exchange (68 in total), combining content analysis of publicly available financial and non-financial information with quantitative proxy indicators, comparative analysis and cross-report verification. The findings indicate that the feasibility of identifying potential signals varies across indicators, companies, and sectors. Proxies based on conventional accounting items tend to be more observable than those that require disclosing ESG-specific amounts. However, the mere existence of an observable accounting item or computable ratio does not establish an ESG-related cause. Missing disclosures also constrain the assessment. The findings suggest that, when combined with contextual disclosure analysis, financial-statement-based proxy mapping can support preliminary ESG risk screening, but cannot independently confirm the existence or magnitude of ESG risks.