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BNP Paribas Asset Management (‘BNPP AM’) took part in the third annual GRASFI conference last month, held online and convened by Columbia University, at which academic researchers from around the world presented papers on a range of responsible investment topics.
The Global Research Alliance for Sustainable Finance and Investment is a global network of 26 leading universities, that was established in 2017 to promote rigorous academic research in finance and responsible investment. BNPP AM has been the asset management sponsor of the GRASFI annual academic conference since 2018 and through its sponsorship, is able to access leading academic research into sustainable finance and investment, helping to inform the broader debate.
Each year prizes are awarded for the best papers in a range of categories. The overall winning paper at this year’s conference, Aggregate Confusion: The Divergence of ESG Ratings, was written by three researchers from the Massachusetts Institute of Technology’s Sloan School of Management, Florian Berg, Roberto Rigobon and Julian Kölbel (who is also affiliated with the University of Zurich). The researchers analysed and compared the methodologies of six rating agencies to better understand the differences between the processes and ratings of each.
Their analysis examined the factors included in each agency’s assessment, how the factors are measured and their weightings within the overall ESG score. They found that the way in which each factor was measured was the main driver of the differences between the agencies’ rating processes. In other words, even if two or more agencies agree on the factors to be measured, the way in which they are measured can lead to different ratings.
Jane Ambachtsheer, Global Head of Sustainability, BNP Paribas Asset Management, comments:
“Our sponsorship of GRASFI is designed to bring academic rigour to the pressing challenges of sustainable finance and investment, and we aim to share the output with our clients and the broader investment industry. We are very pleased to be able to share the winning paper, which brings some very useful insights to the debate around the highly topical issue of ratings divergence.”
Raul Leote de Carvalho, Deputy Head of the Quantitative Research Group at BNP Paribas Asset Management, comments:
“This is the most exhaustive paper about why ESG ratings may diverge that I have come across so far and one that raises the right questions about these differences. In my view, this paper is a must read by all investment practitioners.”
The winning paper is the first of ten of the most compelling papers presented at this year’s conference that will be summarised on BNPP AM’s Investors’ Corner blog as a monthly series, each being accompanied by practitioner views from BNPP AM experts.
The summary is available here: https://investors-corner.bnpparibas-am.com/investing/sustainable-investing-the-divergence-of-esg-ratings-research
The full paper is available here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3438533
Further information about GRASFI is available here: https://sustainablefinancealliance.org/
Details about the GRASFI 2020 Conference are available here: https://www.susfinalliance2020.org/
