When ESG meets AAA: The effect of ESG rating changes on stock returns

Savva Shanaev*, Binam Ghimire

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

63 Citations (Scopus)


This study is the first to employ calendar-time portfolio methodology to investigate the impact of 748 ESG rating changes on stock returns of US firms over 2016-2021. While ESG rating upgrades lead to positive yet inconsistently significant abnormal returns of 0.5% per month, downgrades are detrimental to stock performance, leading to statistically significant monthly risk-adjusted returns of -1.2% on average. These findings are more pronounced for ESG leaders than laggards and are robust to various asset-pricing model specifications. The effects of ESG rating levels are modest, with ESG laggards underperforming in risk-adjusted terms.
Original languageEnglish
Article number102302
JournalFinance Research Letters
Issue numberPart A
Early online date10 Jul 2021
Publication statusPublished - 1 May 2022


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