A Comparison of ESG Ratings Reveals Significant Differences

Sustainable investments are becoming more and more important. However, finding the right investment is a difficult and time-consuming matter. As a result, more and more investors are turning to specialist ESG rating providers. Ratings are becoming more and more important.

The problem, however, is that the term sustainability is not clearly defined. The understanding of what is sustainable varies widely. It is therefore difficult to measure this value in ESG ratings at all.

This, in turn, means that the ESG ratings of the providers can vary considerably. This is something the Storch Research Institute has discovered in its investigations. The providers MSCI ESG, RobecoSAM and Substainalytics compared sustainability research and their scoring models.

It was found that the companies did not use uniform standards.

Score Model If the different scores are adjusted to the same numerical scale from 0 to 100, VW receives a score of zero points at MSCI, Sustainalytics, on the other hand, awards 19 points to the Wolfsburg car manufacturer, and RobecoSAM rates VW with 65 points. This is different for Porsche. Porsche Automobil Holding scores 88 points in Sustainalytics, while RobecoSAM awards 45 points.  

Correlation of the valuation The correlation of the ratings was also compared. A comparison of the groups with the 100 highest ratings resulted in 235 different names. Only eleven companies are among the top 100 at all rating providers.  

Better valuation of German markets An enormous difference can also be seen in the rating of service providers’ assessment of the various markets. What is striking here is the better rating of the German markets. Only 25% of German companies received a rating of 50 points or worse. This is different for the US companies. Here 50% of US companies are below or above this value. However, the higher valuations of German companies cannot necessarily be attributed to German companies operating more ‘sustainably’.  

High Ratings MSCI ESG and Sustainalytics comparatively often gave companies a high rating. The average score for the two providers is just in the upper half. At RobecoSAM, the average score was 48.4%. Conclusion is that a responsible approach to the assessments is necessary. The assessments provide valuable indications and food for thought. However, an unreflected application of the assessments should be avoided.

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