The Retrospective and Predictive Effectiveness of ESG Ratings: Evidence from China

Rongxuan Liu (), Derek Wang, Shanshan Zheng and Ning Cai
Additional contact information
Rongxuan Liu: School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China
Derek Wang: School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China
Shanshan Zheng: School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China
Ning Cai: School of Business Administration, Capital University of Economics and Business, 121 Zhangjialukou, Beijing 100070, China

Sustainability, 2025, vol. 17, issue 11, 1-20

Abstract: With the development and proliferation of sustainable investing, ESG ratings have gradually become an important basis for measuring corporates’ ESG performance and influencing investors to make investment decisions. However, the validity of ESG ratings has also raised public concerns due to the differences in the evaluation systems and standards of ESG rating agencies. This paper analyzes the effectiveness of ESG rating data provided by Chinese rating agencies in terms of retrospective and predictive effectiveness. It assesses how well these data reflect the past ESG performance of Chinese companies and its ability to predict future ESG performance. The study focuses on China Securities Index 300 companies from 2016 to 2020 and benchmarks their ESG ratings against five indicators derived from negative events. Through regression analysis, this paper studies the association between these indicators and ESG ratings. The results indicate that domestic ESG ratings in China can capture the past ESG performance of Chinese companies, but they can only partially predict the future ESG performance.

Keywords: sustainable investing; ESG rating; effectiveness; ESG performance; CSR (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2071-1050/17/11/4819/pdf (application/pdf)
https://www.mdpi.com/2071-1050/17/11/4819/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:17:y:2025:i:11:p:4819-:d:1663038

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().