Aggregate Confusion: The Divergence of ESG Ratings

Abstract This paper investigates the divergence of environmental, social, and governance (ESG) ratings based on data from six prominent ESG rating agencies: Kinder, Lydenberg, Domini (KLD), Sustainalytics, Moody’s (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), MSCI. We document map different methodologies onto a common taxonomy categories. Using this taxonomy, we decompose into contributions scope, measurement, weight. Measurement contributes 56% divergence, scope 38%, weight 6%. Further analyzing reasons for measurement detect rater effect where rater’s overall view firm influences specific The results call greater attention to how underlying are generated.