Is History Repeating Itself? The (Un)Predictable Past of ESG Ratings

59 Pages Posted: 5 Nov 2020 Last revised: 1 Sep 2021

See all articles by Florian Berg

Florian Berg

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Kornelia Fabisik

Frankfurt School of Finance & Management

Zacharias Sautner

Frankfurt School of Finance & Management; European Corporate Governance Institute (ECGI)

Date Written: August 24, 2021

Abstract

The explosion in ESG research has led to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of a key rating provider, Refinitiv ESG (formerly ASSET4). Depending on whether the original or rewritten data are used, ESG-based classifications of firms into ESG quantiles and tests that relate ESG scores to returns change. While there is a positive link between ESG scores and firms’ stock market performance in the rewritten data, we fail to observe such a relationship in the initial data. The ESG data rewriting is an ongoing rather than a one-off phenomenon.

Keywords: ESG ratings, ESG investment, CSR

JEL Classification: G24, G30, G34

Suggested Citation

Berg, Florian and Fabisik, Kornelia and Sautner, Zacharias, Is History Repeating Itself? The (Un)Predictable Past of ESG Ratings (August 24, 2021). European Corporate Governance Institute – Finance Working Paper 708/2020, Available at SSRN: https://ssrn.com/abstract=3722087 or http://dx.doi.org/10.2139/ssrn.3722087

Florian Berg

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
Cambridge, MA 02142
United States

Kornelia Fabisik (Contact Author)

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

Zacharias Sautner

Frankfurt School of Finance & Management ( email )

Adickesallee 32-34
Frankfurt am Main, 60322
Germany

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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