ESG Ratings,also referred to as 'scores', are used as a measure of a company's environmental, social, and governance performance. They are intended to be used as metrics that inform investment decisions alongside traditional financial and industrial indicators.A range of ESG criteria is used in scoring.
See Also
What is ESG score and why does it matter for your company?ESG criteria: definition & overview ESG (Environmental, Social, & Governance)Free ESG Checklist & Template | PDF | SafetyCultureKey ESG Scoring Criteria(source: OECD)
See Also
ESG Scores & Rating AgenciesESG Ratings are calculated by well-known agencies and firms, including Bloomberg, Dow Jones, MCSI, Sustainalytics, Refinitiv, S&P Global, FTSE Russell, and Moody's, as well as sustainability-focused firms and organizations like CDP, Corporate Knights, and RepRisk.
Limitations of ESG Ratings
- Standardization:ratings agencies use varying approaches and measures in the determination of ESG Ratings, including differing categorization and weighting of environmental, social, and governing criteria
- Greenwashing:companies have been found to misrepresent their sustainability efforts, which can falsely inflate their ESG Rating. This is further complicated by the wide variance in sustainability standards and reporting practices among firms in the U.S.
Learn more about the components and providers of ESG Ratings here.
