Esg company ratings – the nature and features of formation

Abstract

The article examines the essence of ESG ratings, the causes and history of their origin and dissemination. It has been found that sustainable development of the companies is in the interests of both investors, companies themselves and other stakeholders, as there is a clear positive correlation between commercial success, financial performance and the efforts of businesses to implement the principles of sustainable development. One of the important tools for evaluating the effectiveness of sustainable development of companies, their risks and potential opportunities in environmental, social and corporate governance spheres are ESG ratings, which provide the conversion of large amounts of information into assessments that can be used in management decision-making. It has been defined that ESG ratings are determined by more than one hundred specialized rating agencies and companies – providers of information and financial decision-making tools. The classification and characteristics of the main ESG ratings are presented. The proposed classification differentiates ESG ratings on such attributes as the level of coverage of companies; specialization; transparency of formation methodology; information used for ratings’ preparation; scale used to rank companies. Examination of the nine best in terms of quality and usefulness international ESG ratings (RobecoSAM Corporate Sustainability Assessment, Climate, Water & Forest Scores, Sustainalytics' ESG Risk Ratings, MSCI ESG Ratings, ISS ESG Governance QualityScore, ISS-Oekom Corporate Rating, Bloomberg ESG Disclosure Scores, FTSE Russell's ESG Ratings, Thomson Reuter's ESG Scores) and the first in Ukraine professional corporate sustainability rating Sustainable Ukraine allowed to establish that they differ significantly in algorithms of their formation, areas and indicators for companies’ assessment, sources of data used, etc., however, the common characteristics of the most authoritative ESG ratings are wide market coverage, transparency and correctness of the methodology used, experience and competence of specialists – developers of ratings.