Conflict of interest fear over ESG ratings from MSCI

Concern that indices business could skew environmental ratings
Ben Martin
The Times
Companies are accused of using ESG ratings to portray themselves as more sustainable than they really are, a practice known as “greenwashing”
Companies are accused of using ESG ratings to portray themselves as more sustainable than they really are, a practice known as “greenwashing”
ANNA WATSON/ALAMY
Ben Martin
The Times

One of the biggest providers of sustainability ratings appears to give higher rankings to companies that generate better stock market returns, raising concerns that there are conflicts of interest at play in the booming industry.

Joachim Klement, an investment strategist at Liberum, a stockbroker, said on Monday that there may be “monetary conflicts of interest at play” in the burgeoning but opaque industry of providing environmental, social and governance (ESG) ratings.

He raised concerns after separate research published by Columbia University and Emory University suggested that ESG ratings issued by MSCI, a big player in the industry as well as a leading provider of investment indices linked to ESG criteria, might be skewed by its indices business.

The researchers compared the ratings assigned by MSCI,