What happens when an ESG rater rewrites the database?
Thought Leadership Webinar: To assess the quality of a firm with respect to environmental, social, and governance (ESG) aspects, it is common practice to blindly rely on ESG rating providers. But to what extent can we really rely on these ratings? Do you know that apart from methodology changes, rewritings of potentially the entire historical database by one of the major rating agencies can occur on a weekly basis?
Date:
June 23, 2021
Time:
10:00 - 11:00 a.m. EDT
3:00 - 4:00 p.m. GMT
Presented By:
Kornelia Fabisik, PhD, CFA, PRM
Assistant Professor of Finance, Frankfurt School of Finance & Management
Session Length:
60 minutes
The explosion in ESG research has led to a strong reliance on ESG rating providers. In a research paper co-authored with Zacharias Sautner and Florian Berg, we document widespread changes to the historical ratings of one of the major rating agencies. 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.
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Kornelia Fabisik is an Assistant Professor of Finance at the Frankfurt School of Finance & Management. Her research is focused on Corporate Finance and Corporate Governance, especially on insider ownership, CEO incentives, and environmental, social, and governance (ESG) aspects.
Kornelia's research has been accepted for publication at the Journal of Financial Economics, presented at conferences such as the Western Finance Association, European Finance Association, and Global Corporate Governance Colloquia, as well as featured on scientific forums such as the Harvard Law School Forum on Corporate Governance & Financial Regulation and the European Corporate Governance Institute.
Kornelia received her PhD from the École Polytechnique Fédérale de Lausanne and the Swiss Finance Institute. In summer 2019, she was a visiting researcher at the London School of Economics. She gained professional work experience in risk management and investment banking in MEAG in Munich and in UBS in Zurich. She is a Chartered Financial Analyst (CFA) and Professional Risk Manager (PRM).
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$30 USD
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