Rewriting History II: The (Un)Predictable Past of ESG Ratings

61 Pages Posted: 5 Nov 2020 Last revised: 6 Jan 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: November 3, 2020

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 Refinitiv ESG, formerly ASSET4, a key rater. Across two downloads in 2018 and 2020, we document large rewritings in ESG ratings, which are systematic and related to past performance. The retroactive rating changes have 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 returns. We further show that the 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, Rewriting History II: The (Un)Predictable Past of ESG Ratings (November 3, 2020). 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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