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ARTICLES & REPORTS
Nov 08, 2021
Active vs Passive Fund ESG Approach: Does an ESG rating matter?
Highlights
- Companies should strive for meaningful sustainable development instead of chasing backward-looking ESG ratings.
- ESG ratings matter to passive-fund investors, tracking bespoke indices.
- Investors will look beyond ratings when assessing ESG performance.
- Knowing the ESG approach of your investor will help inform corporate strategy
Environmental, Social, and Governance ratings have become a key focus for companies and investors. By achieving good ESG ratings, a company can receive positive market recognition. As a result, companies now tend to spend more time and effort on improving ESG ratings in order to attract investors.
ESG ratings are relevant to passive-fund investors tracking bespoke indices. But not all investors rely on ESG ratings. Active-fund investors are more likely to exercise active ownership through direct engagement with companies on ESG topics.
A better understanding of investor ESG approach will help companies formulate ESG strategy and create meaningful sustainable development instead of chasing backward-looking ratings.
S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.
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