Rewriting History II: The (Un)Predictable Past of ESG Ratings
61 Pages Posted: 5 Nov 2020 Last revised: 6 Jan 2021
Date Written: November 3, 2020
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: Suggested Citation