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The Divergence Of Esg Ratings: An Analysis Of Italian Listed Companies

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  • VINCENZO CAPIZZI

    (Dipartimento di Studi per l’Economia e l’Impresa, Università degli Studi del Piemonte Orientale, “Amedeo Avogadro†, Via E. Perrone 18, 28100 Novara, Italy)

  • ELEONORA GIOIA

    (School of Management, Politecnico di Milano, Via Lambruschini 4, 20156 Milano, Italy)

  • GIANCARLO GIUDICI

    (School of Management, Politecnico di Milano, Via Lambruschini 4, 20156 Milano, Italy)

  • FRANCESCA TENCA

    (School of Management, Politecnico di Milano, Via Lambruschini 4, 20156 Milano, Italy)

Abstract

The increasing attention to sustainability issues in finance has brought a proliferation of environmental, social, and governance (ESG) metrics and rating providers that results in divergences among the ESG ratings. Based on a sample of Italian listed firms, this paper investigates these divergences through a framework that decomposes ESG ratings into a value and a weight component at the pillar (i.e. E, S, and G) and category (i.e. sub-pillar) levels. We find that weights divergence and social and governance indicators are the main drivers of rating divergences. The research contributes to develop a new tool for analyzing ESG divergences and provides a number of recommendations for researchers and practitioners, stressing the need to understand what is really measured by the ESG rating agencies and the need for standardization and transparency of ESG measurement to favor a more homogeneous set of indicators.

Suggested Citation

  • Vincenzo Capizzi & Eleonora Gioia & Giancarlo Giudici & Francesca Tenca, 2021. "The Divergence Of Esg Ratings: An Analysis Of Italian Listed Companies," Journal of Financial Management, Markets and Institutions (JFMMI), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 1-21, December.
    • Handle: RePEc:wsi:jfmmix:v:09:y:2021:i:02:n:s2282717x21500067
    DOI: 10.1142/S2282717X21500067
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    Cited by:

    1. Hasmik V. Khachatryan, 2022. "Divergence of ESG Ratings: Foreign Regulatory Trends," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 5, pages 89-104, October.
    2. Asif, Muhammad & Searcy, Cory & Castka, Pavel, 2023. "ESG and Industry 5.0: The role of technologies in enhancing ESG disclosure," Technological Forecasting and Social Change, Elsevier, vol. 195(C).

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