Aggregate Confusion: The Divergence of ESG Ratings
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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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Berg, Koelbel, and Rigobon (2022) find that the average correlation across ESG ratings services for governance in their sample is around 30%, which is much lower than across the environmental or social ratings.
“According to Berg, Koelbel, and Rigobon (2022), the average correlation across the ESG ratings services for governance in their sample is around 30%, which is much lower than across the environmental or social ratings.”
From Presidential Address: Sustainable Finance and ESG Issues— <i>Value</i> versus <i>Values</i> (2023) · cites this paper as Berg, Koelbel, and Rigobon (2022)
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References 17 · Cited by 3,444
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- Authors
- Berg, F., Kölbel, J. F., & Rigobon, R.
- Affiliations
- Massachusetts Institute of Technology (US)
- MIT Sloan ,
- Venue
- Review of Finance
- Publisher
- Oxford University Press (OUP)
- Published
- 2022-05-23
- Volume
- 26
- Issue
- 6
- Pages
- 1315-1344
- ISSN
- 1382-6662 (ISSN-L)
- 1572-3097
- 1573-692X
- OpenAlex
- W4281296357
- Cited by
- 3,444
- References
- 17
- Citations by year
- 2026: 1264 · 2025: 956 · 2024: 589 · 2023: 394 · 2022: 163 · 2021: 41 · 2020: 27 · 2019: 7 · 2018: 3
- FWCI
- 392.54
- Type
- journal article
- Language
- en
- Open access
- hybrid
- doi.org
- Licence
- Locations
- European Finance Review (publishedVersion, cc-by)
- RePEc: Research Papers in Economics (submittedVersion)
- Alexandria (UniSG) (University of St.Gallen) (submittedVersion)
- Zurich Open Repository and Archive (University of Zurich) (submittedVersion, cc-by)
- Funders
- Massachusetts Pension Reserves Investment Management Board
- AQR Capital Management
- BMW Foundation Herbert Quandt
- Topics
- Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Social Responsibility Reporting
- Social Sciences › Economics, Econometrics and Finance › Finance › Sustainable Finance and Green Bonds
- Social Sciences › Economics, Econometrics and Finance › Finance › Credit Risk and Financial Regulations
- Keywords
- ESG ratings, rating divergence, ESG rating agencies, rating methodology, rater effects, ESG data quality
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