ESG Ratings: Where's the Correlation?
This research paper by Dr. Jim Hawley explores the near-total lack of agreement in ESG score providers, the why, how, and directions for what might be done about it with emerging technologies. These are crucial issues for the investment industry to surmount as ESG’s importance becomes more obvious and wealth owners and asset managers and owners demand that it be taken into account. Addressing the challenges of ESG integration is critical to assessing how to leverage ESG data in the investment process.
This research brief covers:
- Summary of issues with ESG rater disagreement, classifies them as consisting of 8 broad problems, and recommends investor actions to mitigate unreliability of subjective ratings.
- Sustainability Accounting Standards Board (SASB)’s materiality framework throughout paper, including: “granular public goods” concept; SASB versus other standards; sustainability data in the role of traditional financial data.
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