ESG Investors “Don’t Speak the Same Language” on Ratings

Aggregate ESG ratings for companies should be replaced or supplemented by separate environmental, social and governance scores, according to a survey of ESG finance professionals and other stakeholders carried out by non-profit think tank 2° Investing Initiative. Eight-six per cent of respondents said ESG scores should also provide the constituent E, S and G score as individual parameters, while more than half said aggregated ESG ratings should be abolished altogether. The survey also found a marked lack of consensus across and within stakeholder groups on what ESG scores and ratings currently do and should measure. “The disagreement is striking, with some respondents saying ESG ratings should be a 100% risk-based but in practice is 100% sustainability footprint based, and others saying ratings should be 100% sustainability based, but in practice are 100% risk-based,” said the report. “We don’t speak the same language.”

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