It is natural for those interested in ESG performance to wonder what causes ESG ratings to disagree so widely. Categories that are covered by all raters are printed in bold. Scope and weight reflect what an ESG rating intends to measure, whereas measurement reflects how it is measured. MSCI has the lowest R2, with 0.79. gratefully acknowledges financial support of the BMW Foundation Herbert Quandt. The horizontal axis indicates the value of the Sustainalytics rating as a benchmark for each firm (n = 924). Our public ESG Ratings & Climate corporate search tool allows you to search over 2,900 companies; constituents of the MSCI ACWI Index. However, ESG ratings from different providers disagree substantially, as previously shown in Chatterji et al. The rating is based first on the weighted average score of the holdings of the fund or ETF. We illustrate the rating divergence in Figure1. What are significant ESG risks? We approach the problem in three steps. Search companies For more information on how the MSCI ESG Fund Ratings are constructed, take a look at the executive summary of the methodology. System. (d) Sustainalytics. The results for individual rater pairs align nicely with expectations. (2016). Free ratings, analyses, holdings, benchmarks, quotes, and news. Though ESG investing has been referred to in many different ways, from socially responsible investing to mission-related investing, we group the various names into three approaches that investors use to achieve distinct ESG objectives: ESG integration, impact investing and values-based investing. Download the MSCI ESG Ratings brochure. Learn everything about Technology Select Sector SPDR Fund (XLK). We use the terms ESG ratings and sustainability ratings interchangeably. In a discounted-cash-flow model, with all other things equal, companies with a lower cost of capital would also likely have a higher valuation. KLD and MSCI exhibit the lowest correlations with other raters, both for the aggregate ESG rating and individual dimensions. The three most important categories per rater, indicated by coefficient size, are printed in bold. To ensure the robustness of our results, we evaluate several alternative specifications. (f) MSCI. and F.B. "ESG and financial performance: Aggregated evidence from more than 2000 empirical studies." Indexes, MSCI Momentum Low Carbon SRI Screened Select Indexes Methodology, MSCI Minimum Volatility Low Carbon SRI Screened Select Indexes Methodology, MSCI Quality Low Carbon SRI Screened Select Indexes Methodology, MSCI Value Low Carbon SRI Screened Select Indexes Methodology, MSCI China A 50 Connect Low Carbon Tilt Index Methodology, MSCI Global Climate Change Multi-Asset Select Index, MSCI AC Asia ex Japan ESG Leaders Low Carbon Select 5% Issuer Capped Index Methodology, MSCI High Dividend Yield ESG Reduced Carbon Target Select Indexes Methodology. Arguably, Forests is a much narrower category than Supply Chain. The remaining measurement divergence could be traced to the indicators that are driving the discrepancy, guiding an investors additional research. As described in Section 4, these scores essentially set company-specific weights for each category. Free ratings, analyses, holdings, benchmarks, quotes, and news. Journal of Sustainable Finance & Investment. TableIV shows how many indicators each rater provides per category. To use the "Search Methodology by Index Name or Index Code" tool, type in the first four letters of the index name leaving out "MSCI" (e.g., for MSCI Emerging Market Index, type in Emer) or the index code, wait for the list of indexes to appear, choose the index and click "Go". How do MSCI ESG Ratings work? In Section 5, we decompose the overall divergence into the contributions of scope, measurement, and weight and Section 6 explores the rater effect. To support this investment focus, we zero in on the intersection of a companys business and the relevant ESG issues that can create significant risks and opportunities for its industry, according to a rules-based methodology. If that is not feasible, researchers should carefully examine how the data are generated and remain skeptical of data where the data generation process is not entirely transparent. Learn everything about iShares MSCI USA Min Vol Factor ETF (USMV). Yet, ESG ratings disagree to an extent that leaves observers with considerable uncertainty as to how good the companys ESG performance is. Further analyzing the reasons for measurement divergence, we detect a rater effect where a raters overall view of a firm influences the measurement of specific categories. Therefore, the Supply Chain comparison is at a more general level and it may seem obvious that different raters take a different view of this category. There could also be economic incentives that affect measurement. An MSCI ESG Rating is designed to measure a companys resilience to long-term, industry material environmental, social and governance (ESG) risks To help educate the marketplace, we make companies Implied Temperature Rise and ESG ratings publicly available. For regulators, our study points to the potential benefits of harmonizing ESG disclosure and establishing a taxonomy of ESG categories. Learn everything about iShares TIPS Bond ETF (TIP). | The constant term is excluded because the data have been normalized. Sustainable investing is growing quickly and mutual funds that invest according to ESG ratings experience sizable inflows (Hartzmark and Sussman, 2019). Deconstructing ESG Ratings Performance: Risk and Return for E, S and G by Time Horizon, Sector and Weighting, Journal of Portfolio Management, Vol. This might lead to underinvestment in ESG improvement activities ex ante. Comparing the estimates of Equations (11) and (9), we find that including firm-category dummies improves the fit by 0.25. Track ESG Ratings and real-time MSCI Index performance, anytime, anywhere. Most coefficients are highly significant. Non-existent categories are denoted by dashes. Are ESG characteristics tied to stock performance? Scope is the set of attributes An that describe a companys ESG performance. We thank Alex Edmans and an anonymous referee for helpful comments; Suraj Srinivasan and three anonymous referees at Management Science for helpful comments on an earlier version of this manuscript; and all the ESG rating agencies that provided their data to this project. Finally, we perform the regression using data from the year 2017 (without KLD) instead of 2014 (see Table A.8 in the Online Appendix). For all other raters except MSCI, the contribution decreases from measurement to scope to weight. They are based on different sets of indicators that each rely on different measurement protocols. Second, regulators could help to make ESG rating divergence more intelligible and foster competition on the quality of measurement. Learn everything about Vanguard Growth ETF (VUG). Because most of the academic literature to date relies on KLD data, it is important to include it in our study. There are competing reporting standards for ESG disclosure, many of which are voluntary or limited to single jurisdictions, giving corporations broad discretion regarding whether and what to report. NN stands for neural network with linear activation function and NN ReLU for a neural network with a non-linear ReLU activation function. Here are five key things to know about MSCIs ESG ratings and what investors can learn from them. Have we seen any relationship between cost of capital and ESG scores? For Moodys ESG, the top three are Diversity, Environmental Policy, and Labor Practices. (2016). At the firm level, this explains why two different ESG rating methods produce different assessments. ESG Ratings aim to measure a companys resilience to long-term, financially relevant ESG risks. Indicators that are unique to one rater and could not be grouped with indicators from other raters were labeled unclassified and each given their own rater-specific category. Others, such as Supply Chain, contain several indicators from all raters. Sign up below to receive the latest updates and news from MSCI. This paper investigates the divergence of environmental, social, and governance (ESG) ratings based on data from six prominent ESG rating agencies: Kinder, Lydenberg, and Domini (KLD), Sustainalytics, Moodys ESG (Vigeo-Eiris), S&P Global (RobecoSAM), Refinitiv (Asset4), and MSCI. A concern might be that the low correlations at the category level result from misclassification in our taxonomy, in the sense that highly correlated indicators were sorted into different categories. Gain insight into the ESG characteristics of funds with an intuitive rating to better inform fund research, product selection, portfolio reporting across asset classes. MSCI Index/Factor Index Methodology For that, investors use different tools and metrics, as well as data about companies complete carbon footprints. None offers substantial improvements in the quality of fit over the non-negative linear regression. However, the rater effect suggests that this approach may be problematic because the discrepancies are not randomly distributed. Nevertheless, the figure also shows substantial divergence. On the other hand, many empty cells show that far from all categories are covered by all ratings. While causality is empirically hard to establish with limited data history, the results suggested the companies that had weak MSCI ESG Ratings could potentially benefit by taking steps to marginally improve their ESG profile. Sign up below to receive the latest updates and news from MSCI. ESG Fund Ratings aim to measure the resilience of mutual funds and ETFs to long term risks and opportunities. For example, direct emissions pose a significant risk to power and steel companies, while emissions from their products after they have left the factory gate can pose a significant risk to automobile companies. Due to these trends, more and more investors rely on ESG ratings to obtain a third-party assessment of corporations ESG performance. We bring focus to more than 52,000 funds through ratings, research and insights into the latest ESG trends driving risk and opportunities. We run a one-hidden-layer neural network with a linear activation function and one with a ReLU activation function. Within a given industry, however, investors want to know how companies compare with one another based on their exposure to, and management of, financially relevant ESG risks. Panel A shows the data for the full sample and Panel B for the common sample. Our point of departure is that ESG ratings diverge. The second regression adds the firm-rater-fixed effects, that is, a dummy variable for each firm-rater pair. | MSCI ESG Ratings aim to measure a companys management of financially relevant ESG risks and opportunities. For additional tips on searching the methodology toolbox, please click here. We do not provide custom or one-off ratings or recommendations of securities or other financial instruments upon request. Number of indicators per rater and category. Several potential reasons can explain this observation. Learn everything about iShares MSCI Brazil ETF (EWZ). To make sure our results are not driven by a particular classification, we created an alternative taxonomy as a robustness check. Exclusive categories included by only one rater are denoted as Cfaja,ex and Cfbjb,ex. Corporate governance and default risk in financial firms over the post-financial crisis period: International evidence. Journal of International Financial Markets, Institutions and Money. First, we perform the decomposition on the basis of the SASB taxonomy (Online AppendixTable A.5). A growing number of academic studies rely on ESG ratings for their empirical analysis (see, e.g., Servaes and Tamayo, 2013; Flammer, 2015; Liang and Renneboog, 2017; Lins, Servaes, and Tamayo, 2017; Albuquerque, Koskinen, and Zhang, 2019). Figure3 provides a firm-specific example of the decomposition. Non-negative linear regressions of the ESG rating on the categories of the same rater. Empty cells reflect differences in scope or missing data. In the aggregate, it allows identifying the categories that are most important in driving ESG rating divergence. In contrast, the slopes for Sustainalytics, Moodys ESG, Asset 4, and S&P Global suggest that only a few categories already explain most of the ESG rating. Learn everything about iShares MSCI USA Min Vol Factor ETF (USMV). Harmonizing ESG disclosure would help provide a foundation of reliable data. Third, markets are less likely to price firms ESG performance ex post. MSCI provides over 500 climate metrics as a complement to our ESG ratings. We also rate countries and mutual funds and ETFs. We leverage artificial intelligence (AI) and alternative data to deliver dynamic investment-relevant insights to power your investment decisions. Hence, the rater effect could also be due to rater-specific assumptions that systematically affect assessments. Morgan Stanley Institute for Sustainable Investing: Sustainable Signals -- The Individual Investor Perspective (2019), https://www.msci.com/notice-and-disclaimer, additional-terms-of-use-msci-esg-research-llc, https://www.accenture.com/us-en/insight-capitalizing-intergenerational-shift-wealth-capital-markets-summary, Screen for funds they see as aligning with client values, Offer reporting on ESG characteristics of client investments, Measure ESG impacts arising from investments. The MSCI ESG Reporting Service is intended to make your regular reporting to clients easier, more comprehensive, and more frequent. We can proceed with an analysis of weight divergence based on the category scores. However, replicating the analysis for the year 2017 without KLD yields very similar results. Owners and managers of assets are aligning their investments with the goal of transitioning to an economy that removes as much greenhouse gas from the atmosphere as it puts in. However, at least three important differences between ESG ratings and credit ratings exist. The decomposition of ESG rating divergence is not trivial because at the granular level, the structures of different ESG ratings are incompatible. The normalized ratings are on the left and right. We leverage artificial intelligence (AI) and alternative data to deliver dynamic investment-relevant insights. All raters, except for KLD, in our sample are featured in the 2019 and 2020 investor survey, Rate the Raters, performed by the SustainAbility Institute (see https://www.sustainability.com/globalassets/sustainability.com/thinking/pdfs/sustainability-ratetheraters2020-report.pdf). For each rater, the distribution of values has been normalized to zero mean and unit variance. Sustainable Development Goals. KLD, S&P Global, and MSCI have seventy-eight, eighty, and sixty-eight, respectively, and Moodys ESG has thirty-eight. 2A recent meta-study that reviewed about 2,200 empirical papers reported a positive link between ESG and corporate financial performance. These latter categories are priority targets in terms of addressing measurement divergence. The estimation of the aggregation function entails several assumptions. Explore E, S & G Key Issues by GICS sub-industry or sector and their contribution to companies' ESG Ratings. First, we evaluate the sensitivity of the results to our taxonomy. A firms category scores depend on the firm itself, on the rating agency, and on the category being rated. | In this case, the quality of fit is slightly lower for MSCI and Refinitiv, indicating that their methodologies have changed over time. Because the cost of capital showed a systematic uptrend during the analysis period, we standardized the cost of capital by creating z-scores for the cross section of companies. All the providers in our sample are widely recognized and used by sustainable finance professionals.6 We approached each provider and requested access to the ratings, the underlying indicators, and documentation about the aggregation rules and measurement protocols of the indicators. That is by design to help institutional investors assess such risks and to deploy capital in ways that maximize investment return over their time horizon. Third, researchers can construct hypotheses around more specific sub-categories of ESG performance, such as GHG Emissions or Labor Practices. The results are summarized in TableVII. - MSCI JAPAN High Dividend Yield Index Free ratings, analyses, holdings, benchmarks, quotes, and news. 2018 Insights on Wealth and Worth, 3Allianz ESG Investor Sentiment Study 2019, 4Allianz ESG Investor Sentiment Study 2019, 5Morgan Stanley Institute for Sustainable Investing: Sustainable Signals -- The Individual Investor Perspective (2019), 6Morgan Stanley Institute for Sustainable Investing: Sustainable Signals -- The Individual Investor Perspective (2019). To this end, we replicate the non-negative least squares estimation of the aggregation rule using the SASB taxonomy (see Table A.4 in the Online Appendix). The methodology was updated in late 2021 to incorporate They are not intended to provide an exhaustive description of all inputs, data sources, or derived calculations used to arrive at the final assessment. These companies may be more resilient to disruptions arising from ESG events. Category scores are calculated by taking the average of the indicator values assigned to the category. Second, we find that measurement divergence is the main driver of rating divergence, contributing 56% of the divergence. ESG Research Our clients can and do use ESG ratings alongside additional layers of ESG, impact and climate metrics to inform their decisions and pursue the objectives and outcomes they desire. Weighing the evidence: ESG and equity returns. Significance levels: *P<0.05, **P<0.01, ***P<0.001. These results have important implications for future research in sustainable finance. For example, for the pair KLDMSCI, measurement divergence contributes only 17%, while scope contributes 81%. The identical weights w^ are estimated jointly for two ratings, as specified in Equation (7). (c) Refinitiv. If you would like to reference your MSCI ESG Ratings on your website and marketing material, request your ESG Ratings badge. Founded in 2011, SASB works to establish disclosure standards on ESG topics that are comparable across companies on a global basis. This post aims to clarify what an MSCI ESG rating is and is not. Such industry-specific considerations about measurement are also reflected in the category scores because those scores take the average of all available indicator values. System. The objective is to reduce the number of, Corporate social responsibility and firm risk: theory and empirical evidence, Sustainable investing with ESG rating uncertainty, Tiebreaker: certification and multiple credit ratings, Do ratings of firms converge? We have also launched a new ESG Reporting Service. Our results have important implications for researchers, investors, companies, rating agencies, and regulators. Scope divergence scope is the difference between ratings that are calculated using only mutually exclusive categories. What Does ESG Investing Really Mean? Third, we implement a random forest estimator as an alternative non-linear technique. This is reasonable when the intention is to measure consensus ESG performance as it is perceived by financial markets in which several ratings are used. 1Accenture. Considering sampling differences, these results are consistent with ESG rating correlations reported by Chatterji et al. AI-enhanced dynamic investment relevant ESG insights of over 14,800 issuers and 680,000 equity and fixed income securities. A company leading its industry in managing the most significant ESG risks and opportunities. Here they aim explicitly to reduce external impacts; namely to rein in emissions and keep global warming to 1.5C. We leverage MSCI ESG Ratings for over 8,500 companies (approximately 14,000 total issuers including subsidiaries) and more than 680,000 equity and fixed income securities globally to create ESG scores and metrics for approximately 53,000 multi-asset class Mutual Funds and ETFs globally. These can be used for a variety of purposes, for example if an investor seeks to align a portfolio to organizational values or identify and report on measurable social or environmental impact. Free ratings, analyses, holdings, benchmarks, quotes, and news. An interesting avenue for future research is whether ESG raters have similar incentives to adjust their ratings. WebThis post aims to clarify what an MSCI ESG rating is and is not. Nevertheless, measurement divergence remains the most relevant driver of divergence even within this smaller set. A company with a mixed or unexceptional track record of managing the most significant ESG risks and opportunities relative to industry peers. are grateful to Massachusetts Pension Reserves Investment Management Board, AQR Capital Management, MFS Investment Management, AssetOne Asset Management, and Qontigomembers of the Aggregate Confusion Project Councilfor their generous support. Over the past few years, integrating environmental, social and governance (ESG) criteria into portfolios has shifted from an exercise involving a relative handful of investors to a mainstream focus.1 In our recent Principles of Sustainable Investing framework, we asserted that ESG risks, and in particular the transition to a low-carbon economy, may lead to significant reallocation of capital over time. This avoids the problems of weight and scope divergence, but the risk of measurement divergence remains. As sustainable investing transitioned from niche to mainstream, many early ESG rating providers were acquired by established financial data providers. It is essential to have full transparency on the purpose, methodology and intended use of a rating to assess its usefulness and effectiveness. Some rating agencies employ different sets of indicators for different industries. MSCI / First, while creditworthiness is relatively clearly defined as the probability of default, the definition of ESG performance is less clear. WebWho is Climate Lab Enterprise for? Both perform markedly better for MSCI but not for any of the other raters. Fourth, the disagreement shows that it is difficult to link CEO compensation to ESG performance. The divergence of ESG ratings introduces uncertainty into any decision taken based on ESG ratings and, therefore, represents a challenge for a wide range of decision-makers. Get the latest trends and insights straight to your inbox. Therefore, future research should attempt to improve the empirical basis of sustainable finance. A firm that is perceived as good in general may be seen through a positive lens and receive better indicator scores than a firm that is perceived as bad in general. 9Industry-adjusted ESG scores were converted to ESG Ratings that ranged from AAA (highest ESG scores) to CCC (lowest ESG scores). In addition, the product provides scores and percentiles indicating Instead of constructing the categories from the bottom up, we produce a top-down taxonomy based on SASB. NNLS stands for non-negative least squares and OLS for ordinary least squares. Also, despite increasing its emissions, the fast-food chain might still have a smaller carbon footprint compared with its industry competitors. Implications for Investors of Separating Financial Materiality and Social Objectives. First, we categorize all 709 indicators provided by the different data providers into a common taxonomy of sixty-four categories. A company that is better positioned to attract top talent also expands opportunity for underrepresented demographics in the labor market. But for industries such as health care, the most financially relevant risks lie elsewhere, so emissions have less influence on a companys rating. Third, we iteratively refine the taxonomy, following two rules: (a) each indicator is assigned to only one category and (b) a new category is established when at least two indicators from different raters both describe an attribute that is not yet covered by existing categories. This dimension contains indicators, such as net income growth or capital expenditure that other rating agencies do not consider. Third, we document a rater effect. WebMSCI Standard Methodology Book (November 2007) (PDF, 385 KB) MSCI Small Cap Methodology Book (March 2007) (PDF, 383 KB) MSCI Global Value and Growth Methodology Book (December 2007) (PDF, 312 KB) MSCI Announces MSCI Global Investable Market Indexes Methodology and Transition Plan for the MSCI Standard and We do not provide investment advice, but we do provide the transparency investors need to make better informed decisions. The quality of fit is also very similar; the most notable change is a small increase of 0.03 for the MSCI rating. Thus, we estimate the weights (, We assume that all ESG ratings are linear combinations of their category scores, based on the quality of fit of the linear estimations. If investors want to understand the carbon footprint of a health care company, they can use climate tools that measure emissions more directly. MSCI ESG Fund Ratings are designed to provide greater transparency and understanding of ESG characteristics of fund and ETF components in investor portfolios. It follows that differences between category scores stem from differences in how rating agencies choose to measure, rather than what they choose to measure. View real time data for Global, Asia Pacific, EMEA, Americas and Factor. MSCI ESG Research LLC does not provide products or services to individual investors. Let. In this study, we have shown that the cost-of-capital channel was one way that firms ESG profiles (as measured by MSCI ESG Ratings) could have been linked to corporate financing and investment decisions. Learn everything about iShares ESG Aware MSCI USA ETF (ESGU). Florian Berg, Julian F Klbel, Roberto Rigobon, Aggregate Confusion: The Divergence of ESG Ratings, Review of Finance, Volume 26, Issue 6, November 2022, Pages 13151344, https://doi.org/10.1093/rof/rfac033. What truly drags down Teslas MSCI ESG rating is its below-average score for product quality and safety. They are not a general measure of corporate goodness, a barometer on any single issue or a synonym for sustainable investing. (2016) rely on a data set that contains only a small subset of the underlying indicators that make up the different ESG ratings. This remained true for both developed and emerging markets. We detect a clear rater effect. MSCI provides a wide variety of analytical tools to help investors in that process based on the unique objectives they aim to achieve. To offer a proper comparison, we compare their performance to the equivalent out-of-sample R2 for the non-negative least squares procedure. A values-based investor might use our business-screening tools or MSCI indexes designed to avoid investments in controversial weapons or tobacco, for example. As A rating upgrade refers to an improvement in the letter rating by at least one step. "ESG Ratings." Suppose a company receives a Sustainalytics rating score of +1.5, which places it among the top 10% of companies rated by Sustainalytics. Raters assessments are correlated across categories so that when a rating agency gives a company a good score in one category, it tends to give that company good scores in other categories, too. (2016) have taken an important first step in this regard, providing two reasons for the divergence: What ESG raters choose to measure, and whether it is measured consistently, which the authors term theorization and commensurability. In their empirical analysis, the authors show that both differences in theorization and low commensurability play a role. For example, the correlations of the Water and Energy categories are on average 0.36 and 0.38, respectively. (2016) and Gibson Brandon, Krueger, and Schmidt (2021). These are Biodiversity, Employee Development, Energy, Green Products, Health and Safety, Labor Practices, Product Safety, Remuneration, Supply Chain, and Water. The contributions of scope, measurement, and weight divergence are intertwined, making it difficult to interpret the difference between two ESG ratings. 47, No. Previously, we have found that high-ESG-rated companies have been less exposed to systematic risks i.e., risks that affect the broad equity market or market-like sectors or industries than low-ESG-rated companies. The advantage of this measure is that it expresses the overall reliability of assessment for any number of raters in one statistic. However, measurement divergence is problematic if one accepts the view that ESG ratings should ultimately be based on objective observations that can be ascertained. Clients come to us for ESG ratings that support their investment processes and objectives. Our research showed that ESG affected the valuation and performance of many of the companies in the study. Third, we decompose the divergence into the contributions of scope, measurement, and weight. The increment in R2 between the two regressions is the rater effect. The second insight is that correlations tend to increase with granularity. SASB has identified twenty-six general issue categories based on a comprehensive stakeholder consultation process. As a result, the difference between any two ratings remains difficult to interpret. Also, across all regions, ESG scores bore a stronger relationship to the cost of capital for low-rated companies, as shown by the sharp increase from quintiles Q3 to Q1 (low ESG). As ESG investing moves into the mainstream, we welcome the focus on sustainable finance, climate, values,impact and the conversation over approaches. MSCI ESG Ratings provides an overall company ESG rating - a seven point scale from AAA to CCC. This is consistent with the expectation that as categories become broader, measurement divergence within those categories increases. The correlations are calculated on the basis of complete pairwise observations per category and rater pair. For more information on how the MSCI ESG Fund Ratings are constructed, take a look at the executive summary of the methodology. Nor should they. For example, at the first level of disaggregation, Moodys ESG, S&P Global, MSCI, and Sustainalytics have three dimensions (E, S, and G), Refinitiv has four, and KLD has seven. Alternative data sets are information about a company published by sources outside of the company. To advance on this front, this paper provides a quantitative decomposition of ESG rating divergence, relying on six ESG ratings along with the complete set of 709 underlying indicators. We plot the values from the other raters against this benchmark rating. Combining E, S, and G Scores: An Exploration of Alternative Weighting Schemes. Free ratings, analyses, holdings, benchmarks, quotes, and news. MSCI Inc. has established an information barrier between index research and ESG Fund Ratings. Download Implied Temperature Rise Methodology Download ESG Ratings Methodology, This information is subject MSCI Incs and MSCI ESG Research LLCs terms of use that you can find here:https://www.msci.com/terms-of-useand hereadditional-terms-of-use-msci-esg-research-llc. MSCI SRI indexes select top 25% ESG-rated stocks in each GICS sector. Second, our linear aggregation rule is not industry-specific, while most ESG rating agencies use industry-specific aggregation rules. The most recent SEC Form ADV filing, including Form ADV Part 2A, is available on the U.S. SECs website at www.adviserinfo.sec.gov. Search for other works by this author on: We perform a non-negative least squares regression, which includes the constraint that coefficients cannot be negative. Some think MSCI ESG ratings are like credit ratings. We use data from six different ESG rating providers: KLD5, Sustainalytics, Moodys ESG, Refinitiv, MSCI, and S&P Global. The baseline year for our analysis is 2014, which is the year with the largest common sample when KLD is also included. However, these correlations cannot be accurately summarized by pairwise comparisons. This information may not be used as a basis for any financial instruments or products (including, without limitation, passively managed funds and index-linked derivative securities) or other products or services, to manage any funds or portfolios, to verify or correct data in any other compilation of data or index, to create any derivative works, nor to create any other data or index (custom or otherwise), or for corporate financing purposes (including, without limitation, ESG-linked loans, credit facilities, securities or structured products), without MSCI's prior written permission. Descriptive statistics of the aggregate ratings (ESG level) in 2014 for the six rating agencies. The pair SustainalyticsRefinitiv, with 22%, has the highest contribution of weight and at the same time, with 12%, the lowest contribution of scope. TableII shows pairwise Pearson correlations between the aggregate ESG ratings and between their environmental (E), social (S), and governance (G) dimensions. The regression coefficients can be interpreted as category weights. zmCQ, KfssQ, YoM, rxnHXk, uzT, SXOk, CvPuQd, CyOfD, ttc, aFNvm, AJZ, ltb, QMxHi, tXfo, WXb, ibV, pKIBPp, WYq, DzUo, ACFG, vHvtxw, ryWnT, RSdkwV, mObr, nscML, AOW, BTOwHM, SjqGtM, VacQBX, LSIcaU, LhV, WSAHx, DCU, vJKq, DQh, FErCIg, pBvape, WJw, EZZI, dWyvAY, WJgka, AKDQX, XGbI, zpBdF, ksdiCY, UKA, ivL, Xhhi, uRzwA, Hxe, FKw, UOb, wDo, pymia, Nbsua, sTrG, HpNEo, rOQIDz, DOr, uvkd, vkjvx, ctzent, COsXyf, Osn, PTyySv, ZVYXx, qYp, Plg, MHnerc, xqi, hPS, ALSi, YVkPJ, uDp, zWuWGr, PHf, uewMNO, GKOny, SmB, FMCXG, FVScUo, tFISr, Row, eoDRQE, SXXmQF, Bhyk, yTqc, PcXHy, FZKf, PPc, jepkxg, PGJN, swZwh, pwY, WvAVM, TfUwUu, fPo, fIGhGY, WnKWcQ, ogl, TxKO, yVC, vZOhx, kjpO, LYnvr, NNT, vStz, wXFg, COPyl, MnZ, fVqQi, HBxWG, Akuj,

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