Knowledge Base
Assess the role and methodologies of extra-financial rating agencies and their impact on market diversity and evolution
Which ESG rating agency uses a rating scale from AAA to CCC?
MSCI uses a rating scale from AAA to CCC to evaluate companies. Its methodology is based on the ESG Industry Materiality Map and 35 key indicators.
Which agency focuses on climate, forests and water disclosures with a scale from A to D-?
CDP focuses on climate, forests and water disclosures with a scale from A to D-. This agency specifically evaluates these environmental aspects.
Sustainalytics rating scale
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Sustainalytics uses a numerical scale ranging from 0 (negligible risk) to over 40 (severe risk) for its ESG Risk Rating.
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Reliability evaluation criteria
Sources of ESG rating divergence
Reliability evaluation criteria include methodological transparency, data coverage, update frequency, diversity of data sources, materiality approach and sector specificity. Sources of divergence include measurement, scope and weighting differences.
European Regulation (EU) 2024/3005 mandates a separation of rating and advisory activities for ESG rating agencies.
European Regulation (EU) 2024/3005, applicable from 2 July 2026, indeed mandates a separation of rating and advisory activities for ESG rating agencies in order to prevent conflicts of interest.
Correlations between ESG ratings from the main agencies exceed 99%.
Correlations between ESG ratings from the main agencies range between 0.38 and 0.71, which is considerably lower than the correlations observed between credit rating agencies. This indicates significant divergence between the agencies.
According to the study by Berg, Koelbel and Rigobon (2022), what percentage of ESG rating divergences is due to scope differences?
According to the study by Berg, Koelbel and Rigobon (2022), scope differences account for 38% of ESG rating divergences. Measurement differences account for 56%, and weighting differences for 6%.
According to the study by Berg, Koelbel and Rigobon (2022), what is the main source of divergence between ESG ratings from different agencies?
According to the study by Berg, Koelbel and Rigobon (2022), the divergences between ESG ratings from the main agencies are primarily due to measurement differences (56%), which concern how the same attribute is quantified. Other sources include scope differences (38%) and weighting differences (6%).