ESG Ratings, ESG News Sentiment, and Firm Credit Risk Perception

Financial Analysts Journal 2026

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Authors: Fangfang Wang, Florina Silaghi, Steven Ongena, Miguel García-Cestona
DOI: 10.1080/0015198x.2025.2591731
Cited by: 5
References: 42

Abstract

We investigate the impact of Environmental, Social, and Governance (ESG) rating changes and daily ESG news sentiment on firm credit risk. We document a significant increase in credit default swap (CDS) spreads following ESG rating downgrades, especially for the social pillar, while we find a muted reaction to ESG upgrades. A similar asymmetrical effect is documented for ESG news. We further show that the adverse effect of ESG downgrades on the CDS market is stronger for firms with lower creditworthiness, but mitigated in the presence of positive ESG sentiment, a transparent information environment, and higher rating disagreement.

Fields of Study & Subjects

Corporate Social Responsibility Reporting Credit Risk and Financial Regulations Sustainable Finance and Green Bonds

Publication details

Journal / source
Financial Analysts Journal
Publisher
Informa UK Limited
Volume
82
Issue
1
Pages
128–148
Publication date
2 January 2026
Language
EN