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2023 | OriginalPaper | Chapter

8. The Role of ESG on Credit Rating in the Banking Sector: A Mediation Analysis to Disentangle the Direct and Indirect Effects

Authors : Manuela Fasano, Barbara Guardabascio, Elena Stanghellini

Published in: ESG Integration and SRI Strategies in the EU

Publisher: Springer Nature Switzerland

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Abstract

The attention to sustainable finance has dramatically increased in the recent past. In Europe, the perceived relevance of financial sustainability is mainly due to the European Commission’s commitment to integrate Environmental, Social and Governance (ESG) parameters into all aspects of the financial system. Our objective is to investigate the existence and extent of the impact of compliance with ESG on Credit Rating of European companies. With reference to the financial sector, we use mediation analysis to disentangle the effect of standard balance sheet indicators (measuring the stability and leverage of a company) on Credit Ratings, into a direct one and an indirect one, this second mediated by the ESG rating. Given the different implications of the three aspects of the overall score, Environment, Social and Governance, we apply the methodology to each score separately considered. Results show that only Governance plays a role, with a significant indirect effect that is, however, negligible in magnitude. Data are provided by Thomson Reuters.

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previous chapter Insurance Industry and Sustainability Preferences: Contracts and Products
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Metadata
Title
The Role of ESG on Credit Rating in the Banking Sector: A Mediation Analysis to Disentangle the Direct and Indirect Effects
Authors
Manuela Fasano
Barbara Guardabascio
Elena Stanghellini
Copyright Year
2023
Book
ESG Integration and SRI Strategies in the EU

Print ISBN: 978-3-031-36456-3

Electronic ISBN: 978-3-031-36457-0

Copyright Year: 2023

DOI
https://doi.org/10.1007/978-3-031-36457-0_8