The Significance of ESG Ratings for Socially Responsible Investment Decisions: An Examination from a Market Perspective

30 Pages Posted: 22 Nov 2016

Date Written: July 27, 2016

Abstract

Institutional investors are becoming ever more aware of the potential risks and opportunities associated with environmental, social and governance (ESG) factors. From natural resource scarcity to changing governance standards, from supply chain and labor management concerns to evolving regulatory landscapes, it has become increasingly important for socially responsible investment (SRI) professionals to understand the ESG profile behind the assets they are managing. Hence, the access to relevant, consistent, comparable, balanced and reliable ESG information has become a prerequisite for asset managers to take the right investment decisions.

The financial services market has responded to this need by producing specific ESG ratings, rankings and indices. These services serve asset managers of SRI portfolios with the analytical information they would need to assess the ESG performance, risks, and opportunities of assets-under-management (AUM).

The objective of this research paper is to examine the relevance of ESG ratings for SRI decisions from a market perspective and to identify the dynamics that affect the development of the ESG ratings industry in the future.

Keywords: ESG, Ecological Social Governance, SRI, CSR, Sustainability, Credit Rating, CRA, Socially Responsible Investment, Institutional Investor, Responsible Investing

JEL Classification: Q01, Q56, G24, G11, O16

Suggested Citation

Laermann, Michael, The Significance of ESG Ratings for Socially Responsible Investment Decisions: An Examination from a Market Perspective (July 27, 2016). Available at SSRN: https://ssrn.com/abstract=2873126 or http://dx.doi.org/10.2139/ssrn.2873126

Michael Laermann (Contact Author)

Open University ( email )

Valkenburgerweg 177
Heerlen, 6419 AT
Netherlands

HOME PAGE: http://https://www.linkedin.com/in/laermann/

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