ICAEW SE · Chapter 4 · Question 13 of 18
Two ESG rating agencies give the same company very different ratings. Which of the following is the most likely explanation?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: D) The agencies use different methodologies, including different choices of which issues to measure, how to measure them and how to weight them
Explanation
There is no single standard methodology for ESG ratings, so agencies differ in scope, measurement and weighting, and in the data they use. This divergence means users should understand what a rating measures before relying on it. Ratings are not based purely on share price and are not set by the company.
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