REil, Jens (2025). Evaluating the Impact of Integration of ESG Factors in Credit Ratings Using External Credit Assessment Institutions for Corporates
Abstract
This thesis examines the integration of Environmental, Social, and Governance (ESG) factors into credit ratings, focusing on the methodologies employed by External Credit As sessment Institutions (ECAIs) and their implications for financial risk models, particularly in the banking sector. As ESG considerations gain increasing importance in investment decisions, understanding how these factors are incorporated into credit ratings has become critical for financial institutions like ING. This study investigates the varying approaches to ESG integration across different ECAIs and evaluates the challenges and opportunities posed by their respective methodologies. By conducting a literature review and assess ing current practices, the thesis identifies ESG risks through ECAI methodologies and the important variables driving ESG risks to be considered within models. The research concludes by proposing actionable heuristics for financial institutions to better align their credit risk models with ESG factors, aiming to enhance transparency, regulatory compli ance, and risk management strategies. The findings contribute to ESG integration in credit risk assessments, providing actionable insights for financial institutions like ING to adapt to evolving market expectations and regulatory demands
Supervisors
UT Supervisors
- Marcos Machado
- Jörg Osterrieder
ING Supervisors
- Evgenii Pavlovskii