Defining the links between corporate ESG performance and credit risk (Calvert)

By Calvert Institute for Responsible Investing

A growing body of research has established positive links between better management of environmental, social and governance (ESG) factors and improved credit risk.

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This study advances the discussion with the first largesample empirical analyses of the mechanisms that link ESG performance to credit risk.

Our broadest finding showed that companies with strong ESG performance experienced fewer surprises – and lower volatility – in response to both good and bad events.

As examples, in the transportation sector, firms with high ESG performance endured fewer labor problems, unexpected strikes and layoffs. In the oil & gas sector there were fewer industrial accidents. In technology/ media/telecommunications companies, there were fewer terminated business contracts.

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