Linguistics

Philosophy

Psychoanalysis

Materials science

Confusion

Aggregate (composite)

Divergence (linguistics)

Psychology

Mathematics

Econometrics

Composite material

SSRN Electronic Journal

This paper investigates the divergence of environmental, social, and governance (ESG) ratings. Based on data from six prominent rating agencies - namely, KLD (MSCI Stats), Sustainalytics, Vigeo Eiris (Moody's), RobecoSAM (SP Global), Asset4 (Refinitiv), and MSCI IVA- we decompose the divergence into three sources: different scope of categories, different measurement of categories, and different weights of categories. We find that scope and measurement divergence are the main drivers, while weights divergence is less important. In addition, we detect a rater effect where a rater's overall view of a firm influences the assessment of specific categories.

Aggregate Confusion: The Divergence of ESG Ratings