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ESG ratings industry follows an investor-pay model, whereby the data vendors compete on how useful their ratings are for ESG-related investment strategies. A key consideration for data users when selecting among ESG rating providers is how well the different ESG scores do in predicting returns. The credit ratings industry follows an issuer-pay model. This is … Continue reading “What are the incentives in the ESG ratings industry? “

In 2018, one of the major ESG data providers inverted the scale of its ESG ratings (along with making other changes to the data). Since the scale was inverted, now minimum is the best score (0).  You can find a nice paper by Rzeźnik, Weiss Hanley, and Pelizzon (2021) on the topic: “While the new … Continue reading “On the ESG ratings scale inversion”

One of the major ESG ratings providers rewrites not only the current, but also historical ESG data. And that happens even on a weekly basis. Actually, many of them change their data. When you take a good look at manuals and documentation, you can see that ESG scores of many data vendors might change if … Continue reading “On the rewriting of ESG ratings”