According to Jay Clayton, chairman of the US Securities and Exchange Commission, they are “over-inclusive and imprecise.” Researchers at MIT Sloan characterized their effect as “aggregate confusion.” And on a recent Euromoney podcast, Peter Bakker of the World Business Council for Sustainable Development described them as “a bit of a zoo”.
These days, it can seem as though no one has a good word to say for environmental, social and governance (ESG) ratings. Are they really so unfit for purpose? And if so, why are investors still using them?
One of the main criticisms levelled at the industry is the wide divergence of ratings on offer from different providers.
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