The inherent bias of ESG ratings
Simplified metrics needed to overcome challenge of industry comparisons.
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(Mark Hulbert, an author and longtime investment columnist, is the founder of the Hulbert Financial Digest; his Hulbert Ratings audits investment newsletter returns.)
CHAPEL HILL, N.C. (Callaway Climate Insights) — ESG ratings are biased.
No, I’m not referring to companies that are terrible for the environment, are anti-social, or have terrible governance practices. Those are the very companies that the ESG movement is designed to rate poorly, and there’s no bias in giving them low ratings.
Instead, the bias I’m referring to is giving low ratings to companies that actually are helping to mitigate climate change or promoting good social policies and governance practices.