The governance of ESG ratings and benchmarks (infomediaries) as gatekeepers: exit, voice and coercion

David Ramos Muñoz and Agnieszka Smoleńska

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Given the complexity of sustainability issues in finance, ESG financial market information intermediaries have emerged as a way to overcome asymmetries between firms and investors. These infomediaries offer various types of ESG ratings, scores and benchmarks (indices). Like traditional index funds and credit ratings, ESG infomediaries have a gatekeeper function in the market. However, their role is arguably even more complex given the multi-faceted nature of the "E", "S"and "G"and the difficulty of processing the vast amounts of information supplied by issuers. In this context, however, greenwashing risks loom large. To fully capture the governance uses of ESG infomediaries, this article develops a framework that differentiates between exit-, voice- and coercion-enabling regulatory instruments. The regulation of ratings and benchmarks may facilitate the "exit"of customers and investors from firms that fall short of ESG credentials through market mechanisms, give "voice"to critical constituencies or introduce mandatory "coercion". Our analysis identifies the different ways in which existing and developing EU rules shape the supply and demand for ESG financial market infomediaries and explores the "external governance"levers with regard to firm sustainability.

JEL-codes: F3 G3 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2025-04-09
References: Add references at CitEc
Citations:

Published in European Company and Financial Law Review, 9, April, 2025, 21(5-6), pp. 636 - 670. ISSN: 1613-2548

Downloads: (external link)
https://researchonline.lse.ac.uk/id/eprint/128031/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:128031

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().