Do Favorable ESG Ratings Lead to More Socially Responsible Behavior?

One of the hottest topics in the business world is ESG ratings, which are designed to measure the environmental, social, and governance risks of a company. The idea is that increased transparency about companies’ ESG risks will motivate those with a low scores to improve and at least match the performance of competitors with high scores. Yet research on whether these ratings actually work is surprisingly sparse.

In a new study, we examined how companies responded to some of the first ESG ratings in the early 1990s issued by KLD Research & Analytics (KLD), a pioneering ESG rating agency. Contrary … Read more