Interesting article on how ESG rating services fail to deliver quality ratings. Overall, their ratings show bias, are inconsistent and fail to identify risks. We noticed many of these issues when we were reviewing ESG rating services.
Here is the report: ACCF_RatingsESGReport
We use two rating services – one is disclosure-based (Sustainalytics) and the other is news-based (RepRisk). Sustainalytics is highlighted in this article and we are aware of its limitations. Still we believe they do a decent job of reviewing companies’ structure and disclosures. RepRisk does not suffer from many of the issues raised in this report. They have a rules based method for reviewing and evaluating news. They cover thousands of news feeds daily in many different languages. The article touches that most services missed Wells Fargo and Volkswagen issues. RepRisk showed elevated risk levels for these two companies, especially governance, going back to 2012 and 2015, respectively. Crestwood receives Sustainalytics ratings via Bloomberg for free and has purchased RepRisk data through a subscription.
Although this article is highly critical of ESG rating companies. We believe our dual approach of disclosure-based and news-based, helps to mitigate the issues raised in this report.
Please let me know if you have any questions.
Thanks,
John