A Fresh Perspective On ESG Ratings
Most investors who use ESG data seem to do so because they want to satisfy a regulatory or marketing requirement. They aren’t based their buy/sell decisions on ESG-driven signals. We recently started working with a new source of ESG ratings—InvestVerte. This group targets investors who want to use ESG data to improve their investment returns.
Like some of the other sources we work with, InvestVerte uses machine learning to scan a range of sites and sources for ESG-related information. It is seeking to improve the results for investment purposes, by using a range of validation tools, robustness-checking algorithms, and AI methods.
We analyzed the ratings for 414 entities that both InvestVerte and CSRHub covers. The plot below shows there is little correlation between InvestVerte’s view of how entities are performing on ESG issues and CSRHub’s consensus-driven rating.
See Low Correlation Between Our Overall Ratings
We also looked at E, S, and G (Environment, Social, and Governance) sub-ratings from InvestVerte. There were no strong correlations with CSRHub’s lower level ratings.
CSRHub’s objective is to capture how entities are generally viewed by ESG ratings groups. We incorporate millions of insights from 900 different data sources. We don’t average these insights—we go to the bottom level of detail and build up our consensus view, using a big data algorithm.
Some of our sources have high correlations with our consensus view. Part of this is that some of our larger, better-known sources release their data broadly enough that it influences how entities are generally viewed. Other sources have lower correlations because they are using methodologies that are specialized to their perspective or because they give more weight one aspect of sustainability than to another.
InvestVerte may be different because it seeks to be different. By going against consensus, InvestVerte seems to be trying to show its users where there are opportunities to profit from flaws in the “market view” of an entity’s ESG performance. While we will be including InvestVerte’s signal in our system, its low correlation will give it only a small weight in our scores. This will ensure that this source remains an outlier—and a fresh way of looking at ESG ratings.
CSRHub offers one of the world’s broadest and most consistent set of Environment, Social, and Governance (ESG) ratings, covering 50,000 companies. Its Big Data algorithm combines millions of data points on ESG performance from hundreds of sources, including leading ESG analyst raters, to produce consensus scores on all aspects of corporate social responsibility and sustainability. CSRHub ratings can be used to drive corporate, investor and consumer decisions. For more information, visit www.CSRHub.com. CSRHub is a B Corporation.