The explosion in ESG research has led to a strong reliance on ESG rating providers.
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 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.
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