ESG Ratings: What You Didn’t Know

Randall Kempner, Dr. Deirdre Mendez, Dr. Kishore Gawande, and Shannon Trilli Kempner

Global Readiness Week’s keynote presentation ESG: Global Breakthrough or BS? delivered some surprises. According to Randall Kempner, Senior Advisor to the Energy and Environment program at the Aspen Institute, the current emphasis on ESG may not be such a positive for the environment, social impact, or corporate transparency.

ESG ratings don’t measure corporate responsibility in any of the three categories. Ratings by companies like MSCI consider the potential impact of the world on a company and its shareholders — not the reverse. So even a big greenhouse gas offender can earn favorable ratings if climate change will have little effect on its bottom line.

At the same time, there are reasons for optimism about the ratings. Shannon Trilli Kempner, VP of Corporate Responsibility and Diversity & Inclusion at Catalent Pharma Solutions, said the recent focus on ESG ratings has amplified discussions of companies’ impact. Greater awareness of the distinction between ESG ratings and CSR efforts, she said, may eventually result in more earth/society-friendly choices for investors.

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