ESG to SDG: Do Sustainable Investing Ratings Align with the Sustainability Preferences of Investors, Regulators, and Scientists?

34 Pages Posted: 12 Aug 2022 Last revised: 29 Feb 2024

See all articles by Jan Anton van Zanten

Jan Anton van Zanten

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM); Robeco Asset Management

Joop Huij

Erasmus University - Rotterdam School of Management; Robeco; Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

Date Written: February 29, 2024

Abstract

Disagreement persists over how best to measure corporate sustainability performance, presenting challenges for sustainable investors and researchers in the field of sustainability. We evaluate if two types of sustainability ratings adequately capture companies’ sustainability performance: (i) an SDG score, measuring corporate alignment with the Sustainable Development Goals; and (ii) ESG ratings, assessing environmental, social, and governance risks. We analyze if these sustainability ratings align with how investors, regulators, and climate scientists – as three key stakeholders – judge corporate (un)sustainability. Unlike ESG ratings, the SDG score: (i) reflects investors’ revealed sustainability preferences; (ii) aligns with the EU taxonomy regulation; and (iii) aids climate change mitigation. We conclude that, as a corporate sustainability rating, the SDG score has high, and ESG ratings low, construct validity. While concepts like ESG, sustainability, and impact can be used complementarily, we caution against using them interchangeably.

Keywords: Sustainable investing, ESG, impact investing, Sustainable Development Goals (SDGs), sustainable finance, EU Taxonomy

Suggested Citation

van Zanten, Jan Anton and Huij, Joop, ESG to SDG: Do Sustainable Investing Ratings Align with the Sustainability Preferences of Investors, Regulators, and Scientists? (February 29, 2024). Available at SSRN: https://ssrn.com/abstract=4186680 or http://dx.doi.org/10.2139/ssrn.4186680

Jan Anton Van Zanten (Contact Author)

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA
Netherlands

Joop Huij

Erasmus University - Rotterdam School of Management ( email )

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.rsm.nl/jhuij

Robeco

Rotterdam, 3014DA
Netherlands

HOME PAGE: http://www.robeco.com/

Erasmus University Rotterdam (EUR) - Erasmus Research Institute of Management (ERIM)

P.O. Box 1738
Rotterdam, 3000 DR
Netherlands

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