ESG rating disagreement: Implications and aggregation approaches

This study explores environmental, social and governance (ESG) rating disagreement among different providers, given the variation and lack of consensus in ESG ratings. We utilize three prominent ESG ratings (Sustainalytics, MSCI and Asset4) and employ four aggregation methods. Our analysis reveals relatively high correlations between ratings provided by Asset4 and Sustainalytics, while MSCI's ratings exhibit negative correlations with both. Further, European countries display lower ESG rating disagreement compared to other regions. This study enhances our understanding of ESG rating disagreement and emphasises the importance of considering and synthesizing multiple ratings when assessing firms' ESG performance.