Impact of Environmental, Social, and Governance (ESG) Scores on International Credit Ratings: A Sectoral and Geographical Analysis

This study examines the relationship between environmental, social, and governance (ESG) scores and credit ratings across regions and industrial sectors using a dataset of 188 companies from Europe and the US (2013–2023). Employing ordered probit regression and Granger causality tests, the analysis reveals that, in Europe, higher ESG scores—particularly in human rights and governance—are associated with lower credit ratings, while in the US, resource use and shareholder engagement positively influence credit ratings. Sector-specific effects highlight the importance of environmental performance in healthcare and controversy management in consumer sectors. These findings emphasize the need for region- and sector-specific approaches when integrating ESG factors into credit risk assessments.