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ESG disclosure vs. ESG ratings: Consistent information value?

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  • Oehler, Andreas
  • Neuss, Charlotte

Abstract

We perform textual analysis of annual reports and examine the consistency between firms' ESG rating and firms' ESG disclosure. The paper contributes to the ESG literature by combining two mostly separately investigated research topics: the ESG ratings and the ESG disclosure. This is important as market participants use both sources for decision-making. We develop two different word lists to analyze the ESG information value from a rating agency-perspective and from the academic literature perspective. Our results show that using a comprehensive ESG-related word list from academic studies can explain a substantial proportion of several ESG ratings, indicating that market participants can use firm disclosure as an approximation for several ESG ratings. Given that ESG rating agencies use public information, our study sheds a light on the information value from different information channels which is important for market participants. Moreover, the differences in the information value reveal the difficulties in using ESG ratings and the issue of rating dispersions.

Suggested Citation

  • Oehler, Andreas & Neuss, Charlotte, 2025. "ESG disclosure vs. ESG ratings: Consistent information value?," International Review of Financial Analysis, Elsevier, vol. 107(C).
    • Handle: RePEc:eee:finana:v:107:y:2025:i:c:s1057521925007100
    DOI: 10.1016/j.irfa.2025.104623
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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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