A Comparison of ESG and Credit Ratings

Speaker: Prof. Thierry Roncalli, Head of Quantitative Research, Amundi Institute; and Adjunct Prof. of Economics, University of Evry

Abstract: In this talk, we analyze the construction of ESG ratings and investigate their time dynamics. For that, we build the migration matrix of ESG ratings and assess the probabilistic properties of the associated Markov chain. We observe differences between ESG rating systems. Some of them are more reactive, others present a best-in-class or worst-in-class bias. Finally, we compare them with credit ratings, and highlight the main differences.