Article on Divergent ESG Ratings receives Bernstein Fabozzi/Jacobs Levy Awards – February 2021

This year, a team headed by Elroy Dimson at the Judge Business School of Cambridge University was recognized by the Bernstein Fabozzi/Jacobs Levy Awards for the best article published in the last year in The Journal of Portfolio Management.

The article, Divergent ESG Ratings, published in November 2020, was co-authored with two researchers at the London Business School: Paul Marsh and Mike Staunton. The headline news of the paper is that ESG ratings differ greatly from agency to agency.

The authors note that while bond rating agencies generally agree with each other, ESG agencies do not. Part of the difference is that the weighting of each pillar is different. But there are other differences, which the article describes.

Dimson et al believe that ESG ratings should not be used in isolation, but rather as part of the investment combined with other data and not used in isolation.  That seems to be the methodology most asset managers employ.

(This guest article was contributed to Emerging Markets ESG by Joel Foster, Community Manager, Commodity.Com.)