SustainAbility's recently-released "Rate the Raters 2018: Ratings Revisited" provides an overview of the themes that emerged from a series of roundtables and discussions in 2017 with corporate sustainability professionals, investors, analysts, and ratings representatives, geared toward better understanding the current ESG ratings landscape and as a precursor to a contemplated, comprehensive update this year of the think tank's ratings research first launched in 2010.
The report identifies these four corporate sustainability ratings themes, which are supported by numerous quotes from participants:
- Theme 1: Crowded, Complex, Costly, Time Consuming. The ratings field is crowded; ratings are increasingly complex; some raters charge fees - which companies perceive negatively at best; and completing the surveys is time-consuming.
- Theme 2: Value Versus Time. Companies are constantly having to evaluate and prioritize the value of any particular ratings vs. the substantial time and effort they need to put it to participate.
- Theme 3: The Merits. Participating in the ratings process yields certain benefits including in-house cross-functional relationship-building, improved sustainability practices, and credibility with and access to certain investors.
- Theme 4: Quality is an Issue. Ratings and raters may tend to - among other quality concerns - oversimplify and focus on immaterial issues, and lack transparency and accountability.
While the information supporting the key themes is not surprising for those with exposure to this area, at a minimum - aside from being helpful for benchmarking purposes, it can be somewhat cathartic in the now-apparent widespread recognition of how relatively chaotic and cumbersome this arena has become and the associated challenges corporates and other stakeholders encounter in their attempts to use and benefit from the ratings.
The contemplated further research aims to uncover key shifts in the ratings landscape, understand which ratings investors and sustainability experts are using and why, and guide best practice and identify opportunities to improve.
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