Reflecting on the Methods Used in KLD Research

The data published by Kinder, Lydenberg, Domini Inc. (KLD) has been seen as the de facto standard in corporate social responsibility (CSR) research since the early 1990s. Herein we ask: Have the methods used to analyze KLD data always been appropriate? We begin with the methodological implications of research based on the KLD index (TS-TC) and its successors, total strengths (TS) and total concerns (TC). We then address the fact that CSR research is usually based on an implicit assumption that industry does not matter. The paper next assesses the methodological constraints that should be observed in efforts to develop an ultimate CSR index, a latent variable to explain KLD’s observations. Finally, we use quantile regression to assess the power of nine KLD environmental variables as explicators of environmental performance. The results suggest that KLD offers few consequential findings when appropriate methodological protocols are observed. The paper concludes with suggestions for future research.