What a Difference an ESG Ratings Provider Makes!

Research Affiliates
By January 9, 2020 06:53

What a Difference an ESG Ratings Provider Makes!

  • • ESG ratings vary markedly by ESG ratings provider because each provider has a unique methodology for assigning company-specific ratings. Investors, therefore, must ensure the approach taken by the ratings provider they rely on is consistent with their ESG preferences or they risk constructing portfolios that do not align with their ESG views.
  • ESG portfolios constructed using the ratings of two well-known ESG ratings providers yield large performance dispersion and low correlation of returns. The differences are even greater at the individual ratings level for environmental, social, and governance scores.
  • The differences in how ratings providers calculate ESG scores can result in the same company being ranked quite highly by one provider and quite poorly by another. Understanding which metrics are evaluated and how they are assessed is essential to investors selecting stocks that meet the ESG criteria they care about.
Research Affiliates
By January 9, 2020 06:53


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January 2020