Abstract
In recent years, the incorporation of environmental, social and governance (ESG) factors into credit risk assessments has received attention from both academics and market participants. The present chapter consists of two main parts. The first part discusses academic studies that provide empirical evidence of the ESG-credit risk nexus and the implied mechanisms behind it. The second part discusses how the three major rating agencies (Fitch, Moody’s, S&P) view and incorporate ESG aspects into their credit ratings.