ERM: Rate the Raters
Since ERM's original Rate the Raters research series launched in 2010 and concluded in 2013, the size, influence and complexity of the ESG ecosystem have all increased significantly.
Investor Survey and Interview Results
Since our original Rate the Raters research series launched in 2010 and concluded in 2013, the size, influence and complexity of the ESG ecosystem have all increased significantly.
The number of ESG standards and frameworks, data providers, ratings and rankings has expanded, with 600+ ESG ratings and rankings existing globally as of 2018 and continuing to grow since. As this system has developed, it has influenced how companies report on and disclose ESG data and performance, shaped the creation of ESG-related investment products and framed the public perception of companies.
"How exactly are investors using ESG data? Which ratings do investors use most, and how can that knowledge inform where companies focus?"
In this shifting environment, we consistently hear from corporate practitioners and colleagues that they are encouraged by increased investor interest in ESG performance, but struggle with how to best allocate limited resources to ESG ratings data collection and reporting. While keen to provide clear and useful ESG data and disclosure to investors, we find companies asking: How exactly are investors using our ESG data? Which ratings do investors use most, and how can that knowledge inform where companies focus? These core questions formed the foundation for this most recent Rate the Raters report.
This report shares insights from 17 in-depth interviews with investors, supplemented by a survey of 25 investors, highlighting their views on current ESG ratings and how they use these ratings to evaluate ESG topics. It includes findings on where investors get ESG information, how often they use ESG ratings, investor critiques of ESG ratings and perceptions of specific ratings. The report also includes specific recommendations for companies on how to approach the ESG ratings landscape, get the most out of ESG ratings and improve ESG data disclosure.
Our continued exploration of the ESG ecosystem
SustainAbility remains dedicated to exploring how the ESG ratings ecosystem can evolve in ways that better support and inform all stakeholders. We believe strong and open dialogue between investors, and ESG research firms is needed to help improve the flow of ESG data from companies to investors as well as the manner in which the data is used. We plan to extend this work by launching an ESG-focused member network. This new network will enable improved engagement between companies, investors and ESG research firms while improving ESG-related practices. One of the goals of the network will be to explore possible means to make the collection and utilization of ESG data more efficient and accurate. The network will offer webinars, convene in-person meetings and produce white papers and other reports. Please reach out to one of the contacts listed below if this network interests you.
ERM is speaking at the Sustainable Investment Forum North America during Climate Week NYC, you can join them by registering here today.