SustainAbility’s latest report in its "Rate the Raters" series: “ESG Ratings at a Crossroads”—which is based on a late 2022 survey of 104 corporate and 33 investor respondents—continues to provide noteworthy insights on the use and perceptions of a increasingly crowded field of ESG ratings and ratings providers.
Among the insights:
- Nearly 45% of investors said they were required by their employers to integrate ESG ratings and data into investment strategies in 2022, compared to just 12% in 2018/19.
- ESG ratings products are widely used by investors—94% use them monthly, and nearly half use them multiple times weekly.
- Although investors generally have a greater level of trust in ESG ratings and ratings providers than corporates, trust levels are concerning among both groups, particularly in light of the prevalence and implications of use. Overall trust in ratings providers among investors and corporates ranked 3.31 and 2.91, respectively, on a scale of 1 to 5 (with 1 being the lowest and 5 being the highest), whereas trust in ESG raters to accurately assess corporate sustainability performance was identified as “moderate” among 59% of investors and 52% of corporates. Nearly 30% of corporates indicated a low or very low level of trust in the alignment of ESG ratings and performance.
One corporate respondent notes: “The data captured from our company is often incorrect, and we have to comb through ratings reports to find and fix errors. In one analysis of an ESG Data Provider, we found that over 50 percent of the information required adjustments.”