Investors are increasingly incorporating assessments of companies’ performance on environmental, social, and governance (ESG) issues in their portfolio decisions. The global assets under management of the signatories to the United Nations Principles for Responsible Investment (PRI) have grown from about $20 trillion in 2010 to about $121 trillion in 2021.[1]

Figure 1 Assets under Management of PRI Signatories from 2010 to 2021

Just as traditional investors rely on sell-side analysts and credit rating agencies, socially responsible investors rely on ESG rating agencies as information intermediaries that gather and summarize information about a firm’s ESG performance. Prominent ESG rating agencies … Read more