Quantitative Credit-Rating Models Including ESG Factors

Christoph Klein, CFA, CEFA, Dipl. Kaufm. Summary We constructed a discriminant function that includes an ESG factor. It has a higher explanatory power in discriminating between industrial companies’ good and poor credit qualities than similar models that don’t include an ESG factor. While empirical credit quality research has focused on “classic” credit ratios in the past, we find that adding …