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Abstract This paper investigates the divergence of environmental, social, and governance (ESG) ratings based on data from six prominent ESG rating agencies: Kinder, Lydenberg, and Domini (KLD), Sustainalytics, Moody’s ESG (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), and MSCI. We document the rating divergence and map the different methodologies onto a common taxonomy of categories. Using this taxonomy, we decompose the divergence into contributions of scope, measurement, and weight. Measurement contributes 56% of the divergence, scope 38%, and weight 6%. Further analyzing the reasons for measurement divergence, we detect a rater effect where a rater’s overall view of a firm influences the measurement of specific categories. The results call for greater attention to how the data underlying ESG ratings are generated.
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Florian Berg
Julian F Kölbel
Roberto Rigobón
European Finance Review
University of Zurich
Moscow Institute of Thermal Technology
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Berg et al. (Mon,) studied this question.
www.synapsesocial.com/papers/69ce4febf954deac4fea47fd — DOI: https://doi.org/10.1093/rof/rfac033
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