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Divergences among ESG rating systems: Evidence from financial indexes

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Listed:
  • Conghao Zhu

    (International Business School, Tianjin Foreign Studies University, Tianjin, China)

  • Cunyi Yang

    (Lingnan College, Sun Yat-Sen University, Guangzhou, China)

Abstract

This paper specifically underscores the disparities among various ESG rating systems in China, highlighting their varied interpretations and emphasis on corporate financial factors. Analyzing data on Chinese listed firms from 2009-2022, we observe that while company size and leverage ratio uniformly correlate with ESG scores across rating agencies such as Bloomberg, Huazheng, Wind, and Hexun, the influence of factors like return on assets, cash flow, company age, and Tobin's Q is markedly inconsistent among these agencies. For instance, while operational cash flow and company age are positively associated with ESG ratings from Bloomberg, Huazheng, and Wind, they hold an inverse relationship with Hexun's ratings. This divergence underscores the unique data collection, weighting, and evaluation methodologies employed by each rating system. The study emphasizes the criticality of comprehending the nuances of each rating agency's approach when interpreting ESG scores and crafting ESG strategies. Moreover, it advocates for integrating insights from multiple rating systems to cater to the diverse expectations of stakeholders.

Suggested Citation

  • Conghao Zhu & Cunyi Yang, 2024. "Divergences among ESG rating systems: Evidence from financial indexes," Economic Analysis Letters, Anser Press, vol. 3(1), pages 46-51, March.
    • Handle: RePEc:bba:j00004:v:3:y:2024:i:1:p:46-51:d:206
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    References listed on IDEAS

    as
    1. Mohammed Benlemlih & Isabelle Girerd-Potin, 2017. "Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment," Post-Print hal-01977064, HAL.
    2. Mohammed Benlemlih & Isabelle Girerd-Potin, 2017. "Corporate social responsibility and firm financial risk reduction: On the moderating role of the legal environment," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 44(7-8), pages 1137-1166, July.
    3. Jacob Hörisch & Matthew P. Johnson & Stefan Schaltegger, 2015. "Implementation of Sustainability Management and Company Size: A Knowledge‐Based View," Business Strategy and the Environment, Wiley Blackwell, vol. 24(8), pages 765-779, December.
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