2018 Theses Bachelor's

The Environmental, Social, and Governance (ESG) Ratings Industry: How can publicly traded companies improve their overall ESG scores?

Rostoum, Maryam

This research addresses three questions with respect to environmental, social, and corporate governance (ESG) investing. (1) Do ESG rating agencies weigh disclosure scores more heavily than performance scores when calculating total ESG scores? (2) If changing disclosure scores is easier for companies, have companies been able to improve them over time? (3) How can publicly-traded companies improve their scores given common rating agency practices? Using ESG<GO> Bloomberg terminal function, I compiled panel data on companies’ total ESG scores over time. I found that generally, rating agencies weigh ESG disclosure scores more heavily than performance scores. Specifically, Bloomberg ESG Disclosure scores improved over an eight-year time period. Publically-traded companies can improve their overall scores by restructuring their Corporate Social Responsibility (CSR) reports using the Global Reporting Initiative (GRI) standard and becoming more transparent about their CSR initiatives.