MULTIDIMENSIONAL DISAGREEMENT OF THE CREDIT RATINGS AND ESG SCORINGS GRANTED TO EUROPEAN BANKS. ARE CREDIT RATINGS RELATED TO ESG SCORINGS?

Abstract

The study covers 53 largest European banks and the largest banks from CEE countries. Credit ratings from 3 leading rating agencies and 8 ESG scoring providers are considered. The similarity is measured by cosine distance and Spearman rank correlation. The analysis shows a high similarity between the credit ratings with S&P’s ratings being relatively more conservative. A much more significant divergence characterises the pairwise comparison of ESG scores. As the C/I ratio increases, the similarity of credit ratings increases, and sovereign banks have the relatively highest correlation of credit risk ratings. The most substantial divergence is recorded for UK banks, and the greater the value of a bank’s own funds, the more visible the divergence of ratings given by Big Three providers. In the case of ESG scoring, none of the sample distribution criteria allowed for the determination of the relationship between ESG scorings. Indeed, unlike credit ratings, ESG scores are weakly correlated with each other.