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Sustainable Business

Best Bets for Environmental, Social and Governance (ESG) Ratings

Important: ESG reporting is still in its infancy. There are currently over 100 sustainability-related ratings, rankings and awards. Each of these has its origin in a different set of circumstances and each ranking owner has their own agenda. Specifically measuring ESG performance is challenging, attention to the underlying data is essential, and ESG ratings and metrics should be carefully considered for each application/industry.

Consider this: ESG raters are paid by the investors who use the ratings, not by the companies that are rated. "Rating agencies also show a clear bias favoring developed markets outside of the US." Lastly, researchers have observed considerable limitations when comparing across ESG ratings due to a general lack of transparency about the methodologies employed to produce them.

Five of the prominent ESG rating agencies include: Sustainalytics, Moody's ESG (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), and MSCI (KLD). For a helpful comparison of ESG frameworks, visit the ESG navigator.

For a comparison of database coverage of ESG ratings, visit Edward Lim's (UCONN) comparison page