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Lost in ESG confusion

Jun 13, 2022

There is a lot of confusion reigning in the world of ESG. Regulators, companies, investors, rating agencies and fund sponsors struggle to find common ground on what ESG actually means and how it should be measured. The chart below shows the normalized ratings of over 900 companies (reference on x-axis is Sustainalytics, the other five agencies on the y-axis). The dispersion is significant meaning that for the same companies different rating provider arrive to vastly different ESG ratings. At ECP we always have and are still integrating ESG considerations into our assessment of the earning power, and hence the fair values, of the businesses we invest in as these factors affect the cash flows the companies generate. We are however not labelling and promoting our products as ‘ESG’ till the regulatory landscape gets clearer.

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