In response to increasing demand for sustainable management, adopting Environmental, Social, and Governance (ESG) measures is now more important than ever. Firms now must disclose ESG performance to receive investment and meet the regulation making ESG disclosure mandatory in many countries and exchanges. 

With growing intertest in ESG and relating topics, evaluating firms’ ESG performance become necessary. Many regional and global ESG raters exist, focusing on different sets of firms. Regional ESG raters such as Sustinvest and Korea Institute of Corporate Governance and Sustainability (KCGS) in Korea are more knowledgeable in domestic situations and Korea-specific characteristics, and in particular, they can evaluate companies without English ESG and business reports. However, regional raters mostly focus on domestic firms, making it difficult to compare to internatioanl companies. Global raters have an advantage in this regard, however, their coverages in Korea are restricted to very large global companies. Major global raters  include Sustainalytics, Moody’s, MSCI, S&P Global, CDP, Refinitiv, Bloomberg, and FTSE. 

Unlike credit ratings, ESG evaluation is heterogenous across raters as a company’s ESG performance is assessed using non-financial indicators with strong qualitative characteristics. Divergence in ESG evaluation is inevitable due to difference in eveluation objective, standards, categories,  measurement, etc. However, if ESG ratings diverge too much, it misleads the investors and researchers by sending confusing signals on ESG performance. This research focuses on the divergence of ESG rating of Korean firms, and by following previous research that decompse ESG rating divergence in scope, measurement, and weighting. 

Chapter 2 analyzes the major raters’ methodologies, standards, objectives of ESG ratings. We focus on Sustinvest and KCGS for regional raters, and Refinitiv, Moody’s, Sustainalytics, and CDP for global raters. Each rater focuses on heterogeneous factors to produce the final scores and ratings. Except for CDP, the objective of global raters’ ESG rating is to provide information to investors, as a part of their financial service. Korean raters both sum E, S, G scores and subtract controversy scores of each area, similar to Refinitiv. The two agencies have different objective as well; Sustinvest is to provide information to investors, on the other hand, KCGS is a part of Financial Services Commission, rating ESG performance to provide information to evaluated firms and to support sustainable management. 

In chapter 3, we empirically analyze the divergence in eight ESG ratings of Korean companies. We show that rated companies by the eight raters are not representative firms. The rated firms are disproportionately large and in specific industries, which is more noted in global raters. We also show the correlation coefficients of rater pairs and decompose the divergence into contributions of scope, measurement, and weight. The average correlation coefficient is 0.48; while the coefficient between Sustinvest and KCGS (Korean raters) is 0.7, coefficients between Korean and globla rater are not as large, ranging from 0.03 to 0.641. The average coefficients of each E, S, G score are 0.59, 0.48, and 0.43. In fact, the correlation coefficients of Korean-global raters are vefry small, implying that divergence in G is the greatest. Finally, I redefine each ESG rater’s rating categories into 26 common categories and perform variance decomposition. I find that measurement contributes 37% of the divergence, Scope 77%, and weights -13%.

This research is first to conduct a very close analysis of ESG score gap among Korean companies, including domestic evaluators, and it empirically analyzes rater differences to derive policy implications and further contributes academically.

국문요약

제1장 서론

제2장 국내외 ESG 평가체계 현황 및 평가 기준 비교

1. 해외 평가기관의 평가 기준 및 국내 기업 평가 현황

2. 국내 평가기관의 평가 기준 및 국내 기업 평가 현황

3. 기관별 평가 현황 비교

4. 소결

제3장 국내 기업 ESG 점수 상관관계

1. 기존 문헌과의 차별성

2. 데이터 및 기초 통계량

3. 평가사 간 상관관계

4. 기관별 평가 차이 원인 분석

5. 소결

제4장 결론

1. 연구 결과 요약

2. 시사점

참고문헌

부록

Executive Summary