Abstract
Environmental, social, and governance (ESG) rating agencies, acting as relevant financial market actors, should take a stand on working towards achieving a more sustainable development. In this context, the objective of this paper is, on the one hand, to understand how criteria used by ESG rating agencies in their assessment processes have evolved over the last ten years and, on the other hand, to analyze whether ESG rating agencies are contributing to fostering sustainable development by the inclusion of sustainability principles into their assessment processes and practices according to the ESG criteria. This research is based on a comparative descriptive analysis of the public information provided by the most representative ESG rating and information provider agencies in the financial market in two periods: 2008 and 2018. The findings show that ESG rating agencies have integrated new criteria into their assessment models to measure corporate performance more accurately and robustly in order to respond to new global challenges. However, a deep analysis of the criteria also shows that ESG rating agencies do not fully integrate sustainability principles into the corporate sustainability assessment process.
Highlights
There has been a significant development of sustainable and responsible investment (SRI) in the last ten years
Continuing the process, we examined the relevant environmental, social and corporate governance criteria used by these ESG rating and information provider agencies to evaluate corporate sustainability through a content analysis method [44]
We considered that a theme is relevant if it is public on the ESG rating agency website and, if it is highlighted as a key criterion in the assessment process of the ESG rating agency
Summary
There has been a significant development of sustainable and responsible investment (SRI) in the last ten years. Shareholders, governments and firms have benefitted from this since they request accurate information regarding financial performance and about environmental, social and governance (ESG) aspects, which has become part of their competitive strategy [1] These factors have given rise to the inevitable appearance of ESG rating agencies. If social impact is not internalized and ESG rating agencies act only as economic actors, the messages launched by rating agencies about what could a sustainable company be or how corporate sustainability performance could be measured might be misrepresented. This could be overcome if the expectations held by society and rating agencies about sustainability and sustainable development are matched. Providing society with misleading information about corporate sustainability can affect the social legitimacy and trust of both companies and ESG rating agencies
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