Do Institutional Investors’ ESG Commitments Affect ESG Rating Disagreement? An Empirical Analysis of UNPRI Signatory Commitment

This study conducted a quasi-natural experiment on Chinese mutual funds that signed the United Nations Principles for Responsible Investment (UNPRI) to examine whether institutional investors’ ESG commitments reduce ESG rating disagreements among their portfolio firms. We find that firms held by UNPRI-signatory investors exhibit significantly less ESG rating disagreement than those held by non-UNPRI investors. We further demonstrate that this effect operates through two channels: improved ESG disclosure quality and increased external ESG attention. Corporate governance and industry ESG sensitivity positively moderates the relationship between institutional investors’ ESG commitments and ESG rating disagreement. Moreover, the mitigating effect is more pronounced for domestic rating agencies. This study not only provides evidence for the role of institutional investors in ESG development but also identifies potential pathways to reduce ESG rating discrepancies, offering insights into enhancing the reliability of ESG rating outcomes.