CHAPTER 5

ESG Ratings and Scores

How ratings are built and why the agencies disagree

Opening question

“Two agencies rate the same company 'leader' and 'laggard'. Which one is right?”

In this chapter

What an ESG rating measures — and what it does not
The rating industry and its business model
How a rating is built: key issues, exposure, management and weights, with a worked example
Industry-relative versus absolute ratings
Why ratings diverge: scope, measurement and weights
How controversies change scores
Using ratings wisely: combining sources and building your own score
ESG ratings for companies in Vietnam and Asia

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 5 — with its tables, figures, worked examples and practice lab — is available in the complete edition of ESG and Sustainable Investing: From Theory to Practice — Vietnam Readiness (Volume 4, NXW Investment Library).

Read Chapter 1 free Get the full book — contact@nxw.vn

Sections of this chapter

5.1 What does an ESG rating measure?

5.2 The rating industry

5.3 Building a rating

5.4 Industry-relative versus absolute ratings

5.5 Why ratings diverge

5.6 Controversies

5.7 What ratings are good for — and what they are not

5.8 Using ratings wisely

5.9 ESG ratings in Vietnam and Asia

← Chapter 4: ESG Data and Disclosure Chapter 6: Measuring Climate Risk →