Unpacking the ESG ratings: does one size fit all?

  • In this study, we unpack the ESG ratings of four prominent agencies in Europe and find that (i) each single E, S, G pillar explains the overall ESG score differently,(ii) there is a low co-movement between the three E, S, G pillars and (iii) there are specific ESG Key Performance Indicators (KPIs) that are driving these ratings more than others. We argue that such discrepancies might mislead firms about their actual ESG status, potentially leading to cherry-picking areas for improvement, thus raising questions about the accuracy and effectiveness of ESG evaluations in both explaining sustainability and driving capital toward sustainable companies.

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Author:Monica BillioORCiDGND, Aoife Claire Fitzpatrick, Carmelo LatinoORCiD, Loriana PelizzonORCiDGND
URN:urn:nbn:de:hebis:30:3-715606
URL:https://ssrn.com/abstract=4742445
DOI:https://doi.org/10.2139/ssrn.4742445
Series (Serial Number):SAFE working paper (415)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2024
Year of first Publication:2024
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2024/03/06
Tag:Asset Allocation; ESG Investing; ESG ratings; Portfolio Management; Sustainable Finance
Edition:February 2024
Page Number:18
Note:
Authors aknowledge funding from European Investment Fund in the framework of the EIBURS project ESG-credit.eu and funding by the European Union - NextGenerationEU, in the framework of the GRINS - Growing Resilient, INclusive and Sustainable project (GRINS PE00000018 – CUP H73C22000930001). We gratefully acknowledge research support from the Leibniz Institute for Financial Research SAFE. The usual disclaimer applies.
HeBIS-PPN:516889125
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:G Financial Economics / G1 General Financial Markets / G11 Portfolio Choice; Investment Decisions
G Financial Economics / G2 Financial Institutions and Services / G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies (Updated!)
M Business Administration and Business Economics; Marketing; Accounting / M1 Business Administration / M14 Corporate Culture; Social Responsibility
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht