ESG-ETFs and the constituent firms’ default risk mitigation

Masayasu Kanno

Finance Research Letters, 2025, vol. 81, issue C

Abstract: This study examines whether ESG performance contributes to default risk mitigation in firms issuing securities that comprise an ESG-ETF. This study estimates logistic regression models for the panel data. The model-free results show that the credit risk had reduced for eight ESG-ETFs, but not for eleven. In contrast, the model analysis results indicate that in 17 of 21 ESG-ETFs, ESG performance most effectively mitigates the deterioration of the creditworthiness of ESG-ETF’s constituent firms. This study provides an effective credit risk analysis methodology for selecting an ESG-ETF that comprises firms with better creditworthiness for investors and regulators.

Keywords: ETF; ESG; Default risk; Logistic regression; Panel data (search for similar items in EconPapers)
JEL-codes: C33 G24 G33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:81:y:2025:i:c:s1544612325006440

DOI: 10.1016/j.frl.2025.107384

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