The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2020 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

What’s wrong with ESG ratings?

Environmental, social and governance ratings are far from perfect – but criticism of the industry too often misses the mark.

Lucy Fitzgeorge-Parker ESG 1920px.jpg

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. The MIT Sloan study, published last year, found that the average correlation between ESG ratings from six leading providers was 0.61. The researchers contrasted this with the 0.92

Take out a complimentary trial

Take out a 7 day trial to gain unlimited access to Euromoney.com and Asiamoney.com analysis and receive expertly-curated updates direct to your inbox.

 

Already a user?

Login now

 

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree