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Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as some consumers, activists, and potential employees. Unfortunately, there is little evidence about the validity of these ratings. We examine how well two of the most widely used ratings-those of Kinder, Lydenberg, Domini Research & Analytics (KLD) and Innovest Strategic Value Advisors-predict environmental performance. We find that firms that have more KLD Environmental Concerns have slightly, but statistically significantly, more pollution and regulatory violations in later years than firms that raise fewer "concerns." Innovest scores and KLD Environmental Strengths, in contrast, do not accurately predict the outcomes. We discuss the implications of our findings for advocates and opponents of corporate social responsibility, as well as for studies relating social responsibility ratings with financial performance.

Ratings of corporations' environmental activities and capabilities influence billions of dollars of "socially responsible" investments as well as some consumers, activists, and potential employees. In one of the first studies to assess these ratings, we examine how well the most widely used ratings-those of Kinder, Lydenberg, Domini Research & Analytics (KLD)-provide transparency about past and likely future environmental performance. We find KLD "concern" ratings to be fairly good summaries of past environmental performance. In addition, firms with more KLD concerns have slightly, but statistically significantly, more pollution and regulatory compliance violations in later years. KLD environmental strengths, in contrast, do not accurately predict pollution levels or compliance violations. Moreover, we find evidence that KLD's ratings are not optimally using publicly available data. We discuss the implications of our findings for advocates and opponents of corporate social responsibility as well as for studies that relate social responsibility ratings to financial performance.