Aggregate Confusion: The Divergence of ESG Ratings*

Corporate social responsibility and firm risk: theory and empirical evidence

Florian Berg, Julian F Kölbel and Roberto Rigobon

Review of Finance, 2022, vol. 26, issue 6, 1315-1344

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.

Keywords: Corporate social responsibility; Corporate sustainability; ESG ratings; Divergence (search for similar items in EconPapers)
JEL-codes: G24 M14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (273)

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