The significance of ESG factors and related risk management in corporate strategic decision-making is increasingly pronounced today, yet scant literature delves into this subject. This paper, therefore, employs air pollution as a proxy variable for environmental risk, matching air quality data from cities with data from publicly listed companies in China. It examines the relationship between environmental risk and corporate ESG performance. The research findings suggest that regional air pollution significantly enhances a firm’s subsequent ESG performance. From a legitimacy perspective, air pollution exacerbates the uncertainty in a company’s operations, leading to a heightened perception of external pressures, thereby driving strategic adjustments. These adjustments manifest in sustainable transformations and increased green investments, consequently enhancing ESG performance. Further analysis reveals that the impact of air pollution on corporate ESG performance varies significantly under different regulatory pressures and market attention levels. Economic consequences analysis indicates that, in the face of severe air pollution, improving ESG performance assists in alleviating future financing constraints and securing higher market valuations. This study not only enriches the understanding of factors influencing ESG but also offers a fresh perspective on the relationship between environmental risk and corporate sustainable transformation.