Beyond the Score: A Comparative Analysis of ESG Rating Methodologies

Abstract

This study explores four ESG rating agency methodologies, Morgan Stanley Capital International (MSCI), Sustainalytics, Standard & Poor’s (S&P) Global, and London Stock Exchange Group (LSEG), to understand how they each conclude a rating. In doing so, a comparative analysis was conducted, using a common taxonomy, to understand the sources of divergence between the four rating agency methodologies. The software NVivo was used to code information from the methodologies and their supporting documents, into categories within the taxonomy. Results displayed major differences between the rating agencies. This study suggests that the primary reason for divergence is the scope of research between each rating agency.