Analysis of the Impact of ESG on Corporate Credit

Abstract

This study analyzed the effect of ESG on corporate credit ratings. Currently, interest in ESG at home and abroad is increasing, such as Korea's mandatory disclosure of ESG information in 2025 and the carbon neutrality policy in 2050. At the same time, this study assumed that ESG lists, which are non-financial factors, would have an indirect and partial effect on a company's credit rating, and analyzed it by year and industry. From 2011 to 2021, the importance of variables was measured using ESG division data provided by the Korea Institute of Corporate Governance and Sustainability and KIS-Value's financial statements. Also, Mean Decrease Impurity(MDI) and Recursive Feature Elimination(RFE) were used as variable importance measurement methods. As a result of the study, the importance of E(Environment), S(Social), and G (Governance) items all increased in 2021, compared to 2011, increasing the effect of ESG on corporate credit ratings. In particular, it was found that the importance of S increased the most. In addition, through analysis by industry, it was confirmed that the degree of impact of ESG lists varies from industry to industry. This is a result that can infer the discriminatory application of ESG by industry.