KLD / MSCI ESG ratings (licensed)

Licensed: not exercised here

KLD / MSCI ESG data is a paid licensed product, often reached through WRDS, so it carries no provenance badge: the access path below was not run in this session (no MSCI / WRDS credentials were available). The page documents the access route and the gotchas; treat it as unverified until someone exercises it through a licensed account. This is the honest grade under the institute’s Verified discipline.

This page covers one dataset lineage under two slugs (data:kld and data:msci-esg). KLD STATS is the original firm-level ESG ratings dataset built by KLD Research & Analytics: for each firm-year it records binary strength and concern indicators across categories (environment, community, human rights, employee relations, diversity, product, governance) plus “controversial business” involvement screens. KLD was acquired and the product became MSCI ESG (MSCI ESG KLD STATS, and the forward-looking MSCI ESG IVA ratings). It is the most widely used ESG dataset in the asset-pricing and corporate-finance literature. Papers we distill use it: Duchin et al. on sustainability versus greenwashing, and Starks et al. on corporate ESG profiles and investor horizons.

• Cost: licensed; commonly accessed through WRDS where the institution subscribes, or directly from MSCI. No free tier.
• Vendor: MSCI ESG Research (formerly KLD Research & Analytics).
• Coverage: U.S. public firms; KLD STATS begins in 1991 with a small universe that expands over time (to roughly the largest 1,000 U.S. firms in 2001 and the largest 3,000 in 2003), continuing under MSCI.

Access (when licensed)

• Through WRDS or MSCI. Most academic users pull KLD STATS from the WRDS MSCI/KLD library; the forward-looking IVA ratings and the current MSCI ESG feed are licensed directly from MSCI. Check which your institution provides.
• Annual firm-year panel of indicators. A KLD STATS extract is one row per firm per year with the strength and concern indicator columns; you join it to returns and fundamentals on a firm identifier (CUSIP/ticker in the file).
• Credentials are required; keep any credentials in .env, never hard-coded.

Gotchas (the ones that bite pipelines)

These are the failure modes to expect; they are documented, not verified here.

• The universe expands over time, so an unbalanced panel is mostly coverage, not change. KLD covers a few hundred firms in the early 1990s and expands in steps (notably 2001 and 2003). A firm “becoming rated” is usually the universe growing, not a new ESG event. Control for the coverage expansion or restrict to a consistently covered set.
• Indicators are added and dropped across years. The set of strength and concern indicators changes over time (categories are introduced, split, or retired), so the raw count of strengths or concerns is not comparable across years without rescaling. Normalize by the number of indicators available that year before summing or netting.
• Do not net strengths against concerns naively. A common net score (strengths minus concerns) mixes two distinct constructs and is sensitive to the indicator-count changes above; the literature documents that this measure is fragile. Be explicit about how you aggregate and test robustness to the aggregation choice.
• The KLD-to-MSCI-IVA methodology break is real. After the 2010 MSCI acquisition the legacy KLD STATS strength/concern format continued for a time (through roughly 2013-2014), but the flagship MSCI ESG product moved to the IVA industry-relative, letter-graded (AAA to CCC) methodology, which is not the same measure and is not directly comparable to the old binary indicators. Do not splice KLD STATS and IVA into one continuous series.
• Ratings get revised and restated. Vintages differ; a rating for a past year can change in a later release. Pin the data vintage you used and avoid look-ahead from a restated rating.
• Identifier linking. Files carry CUSIP and ticker, which are not stable panel keys; link to a permanent identifier (e.g. PERMNO via the CRSP/Compustat link) and verify the match rather than joining on ticker.

Reference: KLD STATS category structure

Category	Indicator type
Environment	strengths and concerns
Community	strengths and concerns
Human rights	strengths and concerns
Employee relations	strengths and concerns
Diversity	strengths and concerns
Product	strengths and concerns
Corporate governance	strengths and concerns
Controversial business involvement (alcohol, tobacco, gambling, firearms, military, nuclear)	exclusionary screens

Each indicator is binary (0/1) per firm-year; the count of available indicators in a category changes across years.

Citation

Cite the data owner and product explicitly, distinguishing the legacy from the successor, e.g.: MSCI ESG KLD STATS (formerly KLD Research & Analytics), accessed via WRDS YYYY-MM-DD or MSCI ESG Ratings (IVA), accessed YYYY-MM-DD. State which product and vintage, the years, and the firm identifier used so the sample is reproducible.