A methodology change of an ESG rating provider introduces plausibly exogenous variation in firms’ ESG ratings, which allows us to study their effect on the cost of debt of U.S. firms. We find that loans spreads of downgraded ESG-rated firms in the secondary corporate loan market increase by...

We study the effect of changes in firms' ESG ratings on the cost of debt of U.S. firms using a methodology change of an ESG rating provider. We find that loan spreads of downgraded ESG-rated firms in the secondary corporate loan market increase by about 10% compared to non-downgraded ESG-rated...

This study examines the impact of ESG ratings on mutual fund holdings, stock returns, corporate investment, and corporate ESG practices, using panel event studies. Looking specifically at changes in the MSCI ESG rating, we document that rating downgrades reduce ownership by mutual funds with a...

This study examines the impact of ESG ratings on fund holdings, stock returns, and firm behavior. First, we show that among five major ESG ratings, only MSCI ESG can explain the holdings of US funds with an ESG mandate. We document that downgrades in the MSCI ESG rating substantially reduce...

This paper investigates the divergence of environmental, social, and governance (ESG) ratings. Based on data from six prominent rating agencies - namely, KLD (MSCI Stats), Sustainalytics, Vigeo Eiris (Moody's), RobecoSAM (SP Global), Asset4 (Refinitiv), and MSCI IVA- we decompose the divergence...

How strongly does ESG (environmental, social and governance) performance affect stock returns? Answering this question is difficult because existing measures of performance, ESG ratings, are noisy. To tackle the bias, we propose a noise-correction procedure, in which we instrument ESG ratings...

How does ESG (environmental, social, and governance) performance affect stock returns? Answering this question is difficult because existing measures of ESG perfor- mance -- ESG ratings -- are noisy and, therefore, standard regression estimates suffer from attenuation bias. To address the bias,...

We quantify the financial performance of environmental, social, and governance (ESG) portfolios in the U.S., Europe, and Japan, based on data from six major ESG rating agencies. We document statistically significant excess returns in ESG portfolios from 2014 to 2020 in the U.S. and Japan. We...