Aggregate Confusion: The Divergence of ESG Ratings
64 Pages Posted: 20 Aug 2019 Last revised: 18 May 2020
Date Written: May 17, 2020
This paper investigates the divergence of environmental, social, and governance (ESG) ratings. Based on data from six prominent rating agencies - namely, KLD (MSCI Stats), Sustainalytics, Vigeo Eiris (Moody's), RobecoSAM (SP Global), Asset4 (Refinitiv), and MSCI IVA- we decompose the divergence into three sources: different scope of categories, different measurement of categories, and different weights of categories. We find that scope and measurement divergence are the main drivers, while weights divergence is less important. In addition, we detect a rater effect where a rater's overall view of a firm influences the assessment of specific categories.
Keywords: Corporate Social Responsibility, Corporate Sustainability, ESG Rating Agencies, ESG Rating Disagreement
JEL Classification: M14, G24
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