Carbon assurance: Does it have an impact on credit ratings?

Abstract

This paper examines the impact of firm-level carbon assurance on credit ratings among U.S. publicly traded firms. The findings reveal a positive relationship, indicating that carbon assurance enhances credit ratings by reducing information asymmetry and attracting analyst following. These results are robust to alternative measures of variables, model specifications, and endogeneity tests. U.S. firms with higher carbon assurance benefit from improved creditworthiness, particularly in competitive markets and Democratic-leaning states. These findings support signalling theory and show the strategic importance of carbon assurance in credit assessments and corporate sustainability.