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Bailey McCann, Opalesque New York:

MSCI ESG ratings for U.S. companies have increased since 2015 and a new analysis from D.E. Shaw group suggests that the ratings hold up. D.E. Shaw used the ESG rating framework provided by MSCI and the Russell 1000 as its data sources for the paper. The analysis focuses primarily on E&S factors like emissions and sustainability.

The analysis is designed to show how ESG ratings could theoretically map to the efforts within a given company to improve its ESG score once it has started reporting ESG data. It can be difficult to come away with a clear picture of what ESG ratings actually mean in practice because not every ESG factor is directly applicable to every type of company. Similarly, aggregate rating improvements can look positive on the surface, but could be driven primarily by certain industries or certain types of companies within a cohort.

D.E. Shaw examined whether the changing composition of the Russell 1000 to include fewer resource-intensive companies over the period since 2015 amounted to something like grading US companies on a curve. Analysts also considered other structural factors including improvements in ESG reporting and the number of companies that were new to reporting ESG data. Analysts found that a significant portion of rating increases have been the result of companies working to improve low ESG scores over time.

According to the paper, since 2015 the aggregate E&S score for the Russell 1000 sample ......................

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