ESG Ratings: The Great Confusion

Roberto Casado of Expansion in Spain covers SquareWell’s latest Progress Group paper titled “Managing ESG Data and Rating Risks”. For this Progress Group, SquareWell invited representatives of the world’s largest ESG ratings providers, investors, corporates and academia.

The increased importance of ESG in the investment process has presented a market opportunity for a growing number of operators that have emerged to meet that need. In many cases, companies that were already in other areas of financial services have made acquisitions of specialists in ESG. ISS (owned by the German Stock Exchange) bought Oekom Research; MSCI took over GMI and Carbon Delta; Moodys is the owner of Vigeo Eiris; S&P has acquired Trucost and the ESG area of Robeco; and Morningstar integrated Sustainalytics last year.

Roberto Casado notes that investors and corporates are equally overwhelmed. Not only are there a large number of suppliers, but also their conclusions when studying the behavior of these ESG ratings and data providers tend to be very different. Among 50 of the world’s largest asset managers surveyed by SquareWell, 38 use two or more ESG rating providers. The most prevalent choices by investors include MSCI, Sustainalytics, ISS and Vigeo Eiris.

The full article can be accessed here (in Spanish, subscription required).