Abstract

As more attention is paid to ESG and more data vendors enter the ESG ratings market, the importance of data quality cannot be understated. ESG scores and data are increasingly being integrated into investment decisions in order to enhance the sustainability profile as well as improve portfolio performance. However, ESG data is not immune to bias and although data transparency and disclosures seem to be a virtuous aim of and valuable indicator for sustainability, it too can be a source of bias. As discussed here, this bias can lead to over- or underestimating the true sustainability performance of companies, reducing the reliability of ESG scores.

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