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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Disaggregating Confusion - Testing Divergence of ESG Ratings in the Pharmaceutical Industry |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2022 |
| Abstract Text | ESG ratings have gained a lot of prominence in today’s world, but currently, there is no standardization when it comes to these ratings. Therefore, a lot of divergence between different raters’ assessments of any given firm can be seen. From previous research on this topic, this divergence has been decomposed into scope, measurement, and weights divergence at a metalevel, but there has been no study that looks at qualitative information from a specific sector to understand measurement divergence in detail. For this purpose, the pharmaceutical industry is chosen. Analysis using data from four different raters and three representative companies are chosen and the categories of “water” and “supply chain” are analysed in detail. The findings are that the divergence in these categories are quite significant and the reason for this being that raters use different aspects to measure a given category. Further, a new set of indicators are chosen to holistically measure these categories and then analyse existing data. It can be seen that in some instances the scores provided by raters do not agree with qualitative data that is available, and that existing indicators that raters employ to measure the categories chosen, do not provide a holistic view of aspects under that category. Based on these findings, it is seen that category scores of a given from different raters are significantly different, this reflects the different indicators of the same category that is measured by the rating agencies. A case is made for a more holistic and structured scoring methodology that could potentially provide standard guidelines for rating agencies. With such standardisation, the reliability of ESG scores will increase and its real potential in influencing markets, asset prices and incentives for corporate sustainability. |
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