Your assessment is generally correct, however just one more thing. In ESG ratings, we also take into consideration industry clusters so that companies are ranked against their peers as much as possible. Additionally, in order to have more dimensions, we not only use company self disclosure data but also watch for controversial news, lawsuits.
This means that which data to use and how to normalise or “curve” they grade it on is in the discretion of the industry experts within each ESG rating company.
Of course, at the end of the day, funds hold multiple industries. Which means that they eventually get aggregated so lose some of that granularity.
Thanks for reading Larry,
Your assessment is generally correct, however just one more thing. In ESG ratings, we also take into consideration industry clusters so that companies are ranked against their peers as much as possible. Additionally, in order to have more dimensions, we not only use company self disclosure data but also watch for controversial news, lawsuits.
This means that which data to use and how to normalise or “curve” they grade it on is in the discretion of the industry experts within each ESG rating company.
Of course, at the end of the day, funds hold multiple industries. Which means that they eventually get aggregated so lose some of that granularity.