Publication
The impact of ESG measures on credit ratings: Does it affect creditworthiness?
| Summary: | Nowadays, sustainability has been a recurrent theme and is increasingly becoming a concern for several activity sectors. Financial institutions and banks are not an exception, and they have been taking some measures to reduce environmental and climate risks. However, environmental factors are not the only ones to consider. Social and governmental measures must also be considered when talking about sustainable disclosure. At this point, the ESG emerges as an analysis framework to help measure and qualify the degree to which an organization is operating in a sustainable way. The main aim of this dissertation is to gain a broader perspective on how companies, banks, credit rating agencies and financial institutions are dealing with ESG measures, how they are integrating them into decision-making processes and to understand the impact of ESG measures on credit ratings, and consequently, the impact on debtor’s creditworthiness. This is achieved using the ordered logistic regression model, which is applied to a dataset of public companies in which the country of headquarters is located in Europe. The main conclusions of this research confirm that the relationship between ESG performance and credit ratings exists and is positive, however, for the dataset used, the Social Score is the one that represents a statistically significant effect on credit ratings. It can be added that, even for companies that are geographically close to one another and share a common economic, political, and social environment, the relationship between ESG performance and credit ratings can be complex. |
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| Main Authors: | Seruca, Catarina Leitão |
| Subject: | ESG Credit ratings Banking Creditworthiness Financial performance Sustainability Risk management Environmental Social Governance ESG Performance SDG 7 - Affordable and clean energy SDG 8 - Decent work and economic growth SDG 11 - Sustainable cities and communities SDG 12 - Responsible production and consumption SDG 13 - Climate action SDG 16 - Peace, justice and strong institutions |
| Year: | 2024 |
| Country: | Portugal |
| Document type: | master thesis |
| Access type: | embargoed access |
| Associated institution: | Universidade Nova de Lisboa |
| Language: | English |
| Origin: | Repositório Institucional da UNL |
| Summary: | Nowadays, sustainability has been a recurrent theme and is increasingly becoming a concern for several activity sectors. Financial institutions and banks are not an exception, and they have been taking some measures to reduce environmental and climate risks. However, environmental factors are not the only ones to consider. Social and governmental measures must also be considered when talking about sustainable disclosure. At this point, the ESG emerges as an analysis framework to help measure and qualify the degree to which an organization is operating in a sustainable way. The main aim of this dissertation is to gain a broader perspective on how companies, banks, credit rating agencies and financial institutions are dealing with ESG measures, how they are integrating them into decision-making processes and to understand the impact of ESG measures on credit ratings, and consequently, the impact on debtor’s creditworthiness. This is achieved using the ordered logistic regression model, which is applied to a dataset of public companies in which the country of headquarters is located in Europe. The main conclusions of this research confirm that the relationship between ESG performance and credit ratings exists and is positive, however, for the dataset used, the Social Score is the one that represents a statistically significant effect on credit ratings. It can be added that, even for companies that are geographically close to one another and share a common economic, political, and social environment, the relationship between ESG performance and credit ratings can be complex. |
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