Aggregate Confusion: The Divergence of ESG Ratings
Journal
Review of Finance
ISSN
1572-3097
Type
journal article
Date Issued
2022
Author(s)
Abstract (De)
This paper investigates the divergence of environmental, social, and governance (ESG) ratings based on data from six prominent ESG rating agencies: Kinder, Lydenberg, and Domini (KLD), Sustainalytics, Moody’s ESG (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), and MSCI. We document the rating divergence and map the different methodologies onto a common taxonomy of categories. Using this taxonomy, we decompose the divergence into contributions of scope, measurement, and weight. Measurement contributes 56% of the divergence, scope 38%, and weight 6%. Further analyzing the reasons for measurement divergence, we detect a rater effect where a rater’s overall view of a firm influences the measurement of specific categories. The results call for greater attention to how the data underlying ESG ratings are generated.
Language
English
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Oxford University Press
Volume
26
Number
6
Official URL
Subject(s)
Eprints ID
267202