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What are the problems with ESG scores?

By now, investors are able to retrieve ESG data from many different data providers. While this allows for easier access on a whole, a debate on drawbacks has sparked now.

(Taken from Unsplash)

By now, different scholars have reported on the divergencies between ESG scores from various data providers.

But what does this really mean?

Basically, company A might receive a score of 75 from data provider A and a score of 55 from data provider B. So everyone using data provider A might invest in the asset as it has a considerable high ESG score, while investors who consider data provider B might exclude the asset. One of the first to notice this was Berg et al. (2019).

Additionally, there have also been problems with using a single data provider. Recently it has been shown that ESG scores are re-written meaning that they are changed and adapted post-publication, especially when using Refinitiv (formerly ASSET4). The scores are continously changed and there is no official update to the public. This includes scores published before the publicly announced change in methodology (Berg et al., 2021).

The new re-written scores often show better and more relevant relationship with risk measures as well as financial performance measures (Berg et al. (2021), Sahin et al. (2022a,b)).

Lastly, often ESG scores have a lot of missing data in their aggregation process which can also be cause for concern (Sahin et al. (2022b).

So, what to do?

Many data providers not start to compute a risk measure to overcome this problem. Some are for example Morningstar ESG risk or RepRisk. So let's see what's happening next....

Check out the papers below for references.

Berg, Florian and Fabisik, Kornelia and Sautner, Zacharias, Is History Repeating Itself? The (Un)Predictable Past of ESG Ratings (August 24, 2021). European Corporate Governance Institute – Finance Working Paper 708/2020, Available at SSRN:

Berg, Florian and Kölbel, Julian and Rigobon, Roberto, Aggregate Confusion: The Divergence of ESG Ratings (August 15, 2019). Forthcoming Review of Finance, Available at SSRN:

Sahin, Özge and Bax, Karoline and Paterlini, Sandra and Czado, Claudia, The pitfalls of (non-definitive) Environmental, Social, and Governance scoring methodology (January 28, 2022a). Available at SSRN:

Sahin, Özge and Bax, Karoline and Czado, Claudia and Paterlini, Sandra, Environmental, Social, Governance scores and the Missing pillar - Why does missing information matter? (May 25, 2022b). Corporate Social Responsibility and Environmental Management, Available at SSRN:


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