Sense and Nonsense in ESG Ratings

Ingo Walter

doi:10.1561/108.00000049

journal article Sep 08, 2020

Sense and Nonsense in ESG Ratings

Ingo Walter

Journal of Law, Finance, and Accounting Vol. 5 No. 2 pp. 307-336 · Emerald

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Abstract

Concerns about the future of the natural environment, prevailing social conditions, and governance of private and public institutions inspire today’s ESG movement. This paper proposes a heuristic that can be useful in examining the ESG-scoring issue. We begin with a social control diagnostic covering business activities – one that addresses the interests and actions of various stakeholders in the system. We examine its dynamics in the context of economic, social, and political pressures, including various initiatives to set standards against which business conduct may be calibrated. We evaluate efforts to create metrics that reflect normative improvements in ESG outcomes and performance scoring against them. We assess the industrial organization of the ESG ratings industry and review key empirical studies of ESG-driven investing. We conclude with policy recommendations intended to alleviate existing shortcomings in ESG ratings and improve their role in capital allocation and corporate governance.

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Details

Published: Sep 08, 2020
Vol/Issue: 5(2)
Pages: 307-336

Authors

I

Ingo Walter

New York University Department of Finance, Stern School of Business, , , ,

Cite This Article

Ingo Walter (2020). Sense and Nonsense in ESG Ratings. Journal of Law, Finance, and Accounting, 5(2), 307-336. https://doi.org/10.1561/108.00000049

Sense and Nonsense in ESG Ratings

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