This study examines the impact of real interest rates on ESG performance and risk using a global sample of 30,069 firm-year observations from 2010 to 2023. We find that higher real interest rates are linked to poorer ESG performance and greater ESG risk. Our results are robust to endogeneity tests, including propensity score matching, entropy balancing, and two-stage least squares. The Paris Agreement serves as an exogenous shock to establish causality through a difference-in-difference analysis. The negative impact is more pronounced during high economic policy uncertainty, in jurisdictions with weaker investor protection, and in polluted industries. Notably, the negative impact diminishes for firms that adopt the GRI framework and becomes positive in firms with strong governance. Our findings highlight the need for monetary policies that balance economic stability with sustainability goals.