This bachelor thesis examines the challenges of ESG ratings and attempts to find a solution to these explored challenges. To answer this question, a theoretical definition of ESG and SRI is given first, followed by a discussion of ratings' theoretical background, standards, and rating agencies' traditional procedures. The classic challenges of ratings are also considered. The differences to ESG ratings are then discussed, and sustainability ratings and sustainability rating agencies are examined. In the following part, the individual challenges of ESG ratings discussed theoretically are described.
After the theoretical foundations, the challenges are clarified in an analysis. The analysis refers to two different industries. Based on the results, possible solutions are proposed and discussed. A conclusion is followed. Sustainability has been a highly debated topic for a long time. Waste separation, the purchase of regional food, electricity supply options and the fight against plastic waste are indispensable topics for society. The matter has not yet played such a significant role in financial investments, but interest is growing. Millennials are open to sustainable investments.
This area of interest is shown by a representative YouGov study commissioned by the fund company Deka. Nevertheless, only six per cent of investors own sustainable investments. This occurrence is maybe because the topic is complex for investors to grasp. There is even a lack of a generally valid definition of sustainability. There are indeed several quality seals that make orientation easier, but there are no standards. The EU Commission wants to change that and is working on critical criteria for sustainable investments, but it will be some time before these are fully implemented throughout the EU.
Table of content
Table of content
List of figures
List of tables
1 Introduction
2 Term discussion SRI and ESG
2.1 SRI - Socially Responsibility Investment
2.2 ESG - Environment, Social and Governance Investing
3 Ratings - Standards
3.1 Types of ratings
3.2 Rating Agencies
3.3 Challenges of ratings
3.3.1 Structured products
3.3.2 Compensation of rating agencies
4 Ratings in ESG
4.1 Difference between credit ratings and ESG ratings
4.2 Approaches of rating agencies
4.3 Regulation of ESG
4.4 Challenges of ESG ratings
4.4.1 Different approaches
4.4.2 Transparency
4.4.3 Bias and reliability
4.4.4 Lack of independence
4.4.5 Greenwashing
5 Outline of the challenges
5.1 Course of action
5.2 Chosen industries
5.3 Controversy in the fashion industry
5.4 Controversy in the automobile industry
6 Evaluation and debate on solutions
6.1 Stricter regulations
6.2 Building a metrics
6.3 Determine own standards
7 Recommendation for action and conclusion
Appendix
The Appendix has been removed by GRIN for copyright reasons
Bibliography
Internet sources
- Quote paper
- Anonymous,, 2021, ESG-Ratings (Environmental, Social, Governance). Standards, challenges and solutions, Munich, GRIN Verlag, https://www.grin.com/document/1138672
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