Consolidation of the ESG Rating Industry as an Enactment of Institutional Retrogression

Emma Avetisyan (1) , Kai Hockerts (2)

1 Audencia Business School
2 CBS - Copenhagen Business School [Copenhagen]

Since the late 1980s, a plethora of Environmental, Social and Governance (ESG) rating agencies have sprung up, developing new rating methodologies to meet the (new) needs of concerned investors and to help companies to improve their CSR performance. Since 2005, the industry of ESG ratings has witnessed an important number of both national and cross-border consolidations. Based on a set of 37 interviews and secondary data, the paper reveals growth strategies of ESG rating agencies and explores the driving forces and impacts behind this wave of consolidation. Our focus is on four ESG rating agencies based in the United States, the United Kingdom, France and Switzerland. We have found financial motivation to be the main driver of consolidation. Additionally, and according to the perceptions of the ESG experts interviewed, a decrease in employee motivation coupled with a decrease in the quality of ESG research was observed to be one of the negative impacts of consolidation.

Keywords: ESG rating agencies; growth strategies; industry consolidation; socially; responsible investing; 2

Domains: Environmental and Society; Economics and Finance

Emma Avetisyan, Kai Hockerts. Consolidation of the ESG Rating Industry as an Enactment of Institutional Retrogression. Business Strategy and the Environment, 2017, 26 (3), pp.316 - 330. ⟨10.1002/bse.1919⟩. ⟨hal-01695693⟩