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ESG in the financial industry: What matters for rating analysts?

Author

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  • Mandas, Marco
  • Lahmar, Oumaima
  • Piras, Luca
  • De Lisa, Riccardo

Abstract

This paper examines ESG rating analysts’ views from Sustainalytics in order to highlight the main ESG features discussed across 11 sectors. We perform a topic modeling and a sentiment analysis to identify the content of analysts’ opinions on the companies’ ESG performance and to uncover the embedded sentiment associated with each ESG feature. The results of the topic modeling consist of 13 topics with a sector driven distribution. The analysis suggests that the best ESG performing financial institutions show to be actively committed to the code of best practice in governance and disclosure transparency. Whereas penalized financial entities seem to manifest less attention to ethical conduct and mis-selling. Furthermore, data privacy and security attract analysts’ attention and should be closely monitored by financial entities. Finally, it is important to actively disclose ESG activities as the more information is available the better ESG commitment is reflected in analysts’ views.

Suggested Citation

  • Mandas, Marco & Lahmar, Oumaima & Piras, Luca & De Lisa, Riccardo, 2023. "ESG in the financial industry: What matters for rating analysts?," Research in International Business and Finance, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:riibaf:v:66:y:2023:i:c:s027553192300171x
    DOI: 10.1016/j.ribaf.2023.102045
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    Cited by:

    1. Guo, Kun & Bian, Yuan & Zhang, Dayong & Ji, Qiang, 2024. "ESG performance and corporate external financing in China: The role of rating disagreement," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. del Río, Cristina & Ferrer, Elena & López-Arceiz, Francisco J., 2024. "Analyst optimism and market sentiment: Evidence from European corporate sustainability reporters," Research in International Business and Finance, Elsevier, vol. 69(C).

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    More about this item

    Keywords

    ESG; ESG rating analyst; Banking; Topic modelling; Textual analysis; Sentiment analysis;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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