THINK
When the Ratings Disagree
Two ESG agencies look at the same company and reach opposite verdicts. You have to decide what to do with that.
- Type
- Activity
- Difficulty
- Intermediate
- Length
- 12 min activity
In the episode, Vidyanshi explains why ESG ratings from agencies like MSCI and Sustainalytics so rarely agree. This activity puts you on the receiving end of that disagreement. You are not being asked to find the true rating. You are being asked what a sensible person does when the measuring tools contradict each other.
Pick the option you would defend for each decision, then read what it optimises for, what it risks, and what you would still need to find out. There is no score.
ONE COMPANY, TWO VERDICTS
You are a junior analyst at a fund that says it takes ESG seriously. A large consumer technology company is up for review. One agency rates it near the top of its industry. Another flags it as carrying high unmanaged ESG risk. Your manager wants a recommendation by Friday.
DECISION 1 OF 2
The two ratings point in opposite directions. What do you do first?
DECISION 2 OF 2
You find the low rating is driven mostly by supply-chain labour and emissions risk. The high rating weighted the company's own operations, which are much cleaner. What now?
An ESG rating is an opinion built on a choice of what to measure and how much to weigh it. Disagreement between agencies is not a bug to average away. It is a map of where the real questions are.