The Top ESG Rating Agencies to Watch in 2024

ESG rating agencies.

Now let’s take a look at some of the top ESG rating agencies.

Sustainalytics:

• Sustainalytics is a Research Affiliate of Definiens AG, a leading global provider of Informatica software for data management and analytics solutions.
• The company provides ESG research and ratings on more than 2,400 stocks across nine sectors in Europe, North America, Asia Pacific, and selected emerging markets.
• The company also offers ESG ratings for funds, fixed income securities, and real estate.
• Sustainalytics has a team of over 160 analysts who use a proprietary scoring system to rate companies on their ESG performance.
• Sustainalytics is officially recognized by the UN Principles for Responsible Investment initiative, which helps promote best practices in ESG management.
• The firm was founded in 2007.

EcoVadis:

• EcoVadis is an ESG rating agency that monitors more than 16 million companies worldwide.
• The company has a team of over 200 analysts who provide ratings for close to 30,000 products and services in 20 industries.
• EcoVadis was founded in 2005.

Rapid Ratings International:

• Rapid Ratings is a financial rating agency that specializes in ESG ratings.
• The company rates the creditworthiness of companies and governments in over 190 countries.
• Rapid Ratings was founded in 2000.
• The company has a team of over 300 analysts.

Verisight:

• Verisight is an ESG rating agency that rates more than 9,000 companies worldwide.
• The company provides ratings for eight industries in 32 countries.
• Verisight was founded in 2011.

Moody’s:

• Moody’s is an ESG rating agency that rates 20,000 financial instruments worldwide. It also publishes research on companies.
• The company has a team of over 1,200 analysts working across 50 countries.
• Moody’s was founded in 1924.

AES Global:

• AES Global produces ESG analysis for companies in over 100 countries. Its reports are free to download but contain advertisements.
• The company was founded in 2010.
• It has a team of 12 analysts who cover 40 countries worldwide.
• AES uses seven core criteria to rate companies: environment, climate change, community engagement, human rights, labor standards, product safety & quality, and corruption.

Pros and Cons of top ESG rating agencies

Now that we’ve looked at a few of the top ESG rating agencies, let’s take a look at some of their pros and cons.

Pros:

• ESG rating agencies can provide a wide range of information on companies, including their environmental, social, and governance performance.
• ESG rating agencies are often officially recognized by UN initiatives and other organizations that promote best practices in ESG management.
• ESG rating agencies use rigorous analytical methods to rate companies.

Cons:

• ESG rating agencies may not be up to date, which can affect their accuracy.
• The companies that an ESG rating agency covers might change over time.
• Rating agencies should be used with caution (as with any other type of research).
• It’s important to do your homework before you invest.
• ESG ratings can vary significantly between rating agencies, so it’s important to compare the information that each agency provides.
• You should be informed about how ESG rating agencies operate and what their affiliations are beforehand.
• ESG ratings are not legally binding (unlike an official credit rating).
• Although they may affect a company’s ability to attract investors, some investors consider them more of an advisory tool than actual financial indicators.