My project investigates the impact of environmental penalties on sustainability ratings for public firms in the US. The goal is to examine whether environmental penalties lead to firms' long and short-term structural changes in sustainability parameters by using a TWFE and an event study design. Receiving a fine might cause not only economic but also reputational damage to firms, given that there has been a change in social norms over the years and the average amount of environmental penalty is too small to deter firms from violating environmental rules. In the second part of my analysis, I will add a dataset with firms' daily news for a time series 17 years long (2002-2019). For every news, I will perform sentiment analysis (Textual Analysis) to determine whether the news is portrayed as positive or negative and if the event described carries a piece of good or bad news. Last but not least, I study whether firms respond to fines by strategically releasing positive news and how the news influences ESG scores.