Rewriting History II: The (Un)Predictable Past of ESG Ratings
51 Pages Posted: 5 Nov 2020 Last revised: 20 Nov 2020
Date Written: November 3, 2020
The explosion in ESG research has lead to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of Refinitiv ESG, formerly ASSET4, a key rating provider. Across two downloads in 2018 and 2020, we document large rewritings in ESG ratings, which are systematic and partially related to firm characteristics. The retrospective rating changes have important implications for researchers and investment professionals. Depending on whether the original or rewritten data are used, rankings and classifications of firms into ESG quantiles change. We demonstrate that these changes affect tests that relate ESG ratings to stock returns.
Keywords: ESG ratings, ESG investment, CSR
JEL Classification: G24, G30, G34
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