ESG Research: Exploring ratings agencies’ limitations

In the last few years there has been a marked increase in capital flows towards sustainable funds. There is a growing investor appreciation that sustainability risks are investment risks, and therefore a failure to manage sustainability risks effectively could negatively impact the value of a portfolio.

At Devlin Mambo we have close links with investment firms and trade bodies, whilst being individual investors in our own right. The basis for our research was curiosity around the big question: Is the data required to manage and communicate sustainability risks readily available?

The purpose of our research was to understand:

• From investment managers, which ratings agencies they were using and their opinions of the data they received
• To what extend sourced ratings were relied on, or if these were further supplemented
• How much the brand name influenced the choice of vendor

We also share our key observations and recommendations.