With sustainable investing proliferating rapidly and ESG ratings becoming embedded in financial markets, providers are coming under the spotlight over the transparency of their scoring systems.
ESG-themed investments saw strong performance and an influx of flows in 2020, and are expected to be a key driver of organic asset growth for managers in 2021. However, these heavy flows into ESG funds are raising questions over the quality and robustness of sustainability ratings. Apples and oranges A company score on ESG can vary immensely given the many different methodologies on the market. "ESG rating systems do not measure the same things: some ratings focus on the ESG risk exposure of companies and governments, while other scores are constructed to measure the overall extr...
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