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

By Witold J. Henisz, Wharton School Deloitte & Touche Professor of Management in Honor of Russell E. Palmer, former Managing Partner, and James McGlinch, Wharton School Doctoral Student

A growing body of research has established positive links between better management of environmental, social and governance (ESG) factors and improved credit risk. The following paper from the Calvert Institute for Responsible investing, advances the discussion with the first large-sample 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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