Open Access Journal Article

Divergences among ESG rating systems: Evidence from financial indexes

by Conghao Zhu a orcid  and  Cunyi Yang b,* orcid
a
International Business School, Tianjin Foreign Studies University, Tianjin, China
b
Lingnan College, Sun Yat-Sen University, Guangzhou, China
*
Author to whom correspondence should be addressed.
EAL  2024, 48; 3(1), 48; https://doi.org/10.58567/eal03010006
Received: 18 August 2023 / Accepted: 11 September 2023 / Published Online: 15 March 2024
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Abstract

This paper specifically underscores the disparities among various ESG rating systems in China, highlighting their varied interpretations and emphasis on corporate financial factors. Analyzing data on Chinese listed firms from 2009-2022, we observe that while company size and leverage ratio uniformly correlate with ESG scores across rating agencies such as Bloomberg, Huazheng, Wind, and Hexun, the influence of factors like return on assets, cash flow, company age, and Tobin's Q is markedly inconsistent among these agencies. For instance, while operational cash flow and company age are positively associated with ESG ratings from Bloomberg, Huazheng, and Wind, they hold an inverse relationship with Hexun's ratings. This divergence underscores the unique data collection, weighting, and evaluation methodologies employed by each rating system. The study emphasizes the criticality of comprehending the nuances of each rating agency's approach when interpreting ESG scores and crafting ESG strategies. Moreover, it advocates for integrating insights from multiple rating systems to cater to the diverse expectations of stakeholders.

Keywords: ESG rating systems; corporate financial factors; rating divergence; ESG strategy;
Copyright: © 2024 by Zhu and Yang. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

Funding

National Natural Science Foundation of China (72371256) , the Excellent Young Team Project Natural Science Foundation of Guangdong Province of China (2023B1515040001) , Tianjin Foreign Studies University (2022YJ5092)

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ACS Style
Zhu, C.; Yang, C. Divergences among ESG rating systems: Evidence from financial indexes. Economic Analysis Letters, 2024, 3, 48. https://doi.org/10.58567/eal03010006
AMA Style
Zhu C, Yang C. Divergences among ESG rating systems: Evidence from financial indexes. Economic Analysis Letters; 2024, 3(1):48. https://doi.org/10.58567/eal03010006
Chicago/Turabian Style
Zhu, Conghao; Yang, Cunyi 2024. "Divergences among ESG rating systems: Evidence from financial indexes" Economic Analysis Letters 3, no.1:48. https://doi.org/10.58567/eal03010006
APA style
Zhu, C., & Yang, C. (2024). Divergences among ESG rating systems: Evidence from financial indexes. Economic Analysis Letters, 3(1), 48. https://doi.org/10.58567/eal03010006

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