There is significant disagreement amongst sustainable finance stakeholders about the value of ESG ratings, with over half saying they should be scrapped altogether, according to a pulse survey carried out by 2° Investing Initiative. 169 respondents answered the survey from 10-18 May, including roughly 50% ESG finance professionals, as well as stakeholders from the non-ESG finance, academic, research, and NGO sectors. The findings have a number of implications for regulators as ESG ratings providers have been under growing scrutiny, with Tesla’s recent removal from the S&P ESG index sparking renewed debate.
Based on the findings of the survey, any ESG ratings regulation should:
- Define whether these types of ratings should relate to sustainability risk or the sustainability footprint of a company.
- Enforce standards around the criteria related to identifying risk or sustainability drivers.
- Delineate whether a rating targets sustainability or risk objectives. This recommendation is supported by +80% of survey respondents.
- Drive ESG ratings convergence through definition of standards.
- Require that ESG scores must always when presented in marketing or communications materials also provide the individual E & S & G scores.
- Define regulatory constraints around the extent to which aggregated ESG ratings may be provided versus ratings on individual sustainability themes, similar to the work on taxonomies.
- Develop a set of standards and rules related to the right to provide ESG ratings.
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About our funder:
This research has received funding from the European Climate Foundation. Disclaimer: This work reflects 2DII’s views only, and the funder is not responsible for any use that may be made of the information it contains.
