The Convergence of Sovereign Environmental, Social and Governance Ratings
This paper studies sovereign environmental, social, and governance (ESG) ratings from the qualitative and quantitative angles. First, it introduces the landscape for sovereign ESG ratings. Second, it provides a comparison with the history of credit...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2021
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/931921615831876764/The-Convergence-of-Sovereign-Environmental-Social-and-Governance-Ratings http://hdl.handle.net/10986/35291 |
| Summary: | This paper studies sovereign
environmental, social, and governance (ESG) ratings from the
qualitative and quantitative angles. First, it introduces
the landscape for sovereign ESG ratings. Second, it provides
a comparison with the history of credit ratings, factoring
in that ESG ratings are in an early development stage.
Third, the paper reviews different actors, key issues,
including taxonomy, models and data from different
providers. The paper provides a qualitative assessment of
the convergence of ratings among providers by introducing a
factor attribution method, that maps all providers'
ratings into a common taxonomy defined by the United
Nations-supported Principles for Responsible Investment
(UNPRI). Then, a quantitative analysis of the convergence is
performed by regressing the scores on variables from the
World Bank sovereign ESG database. A noticeable contribution
to the literature is a high level of explanatory power of
these variables across all rating methodologies, with a R2
ranging between 0.78 and 0.98. An analysis of the importance
of variables using a lasso regression exhibits the
preponderance of the governance factor and the limited role
of demographic shifts for all providers. |
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