“The constantly-evolving nature of the market is a big roadblock,” said Thaler. “If a big credit agency purchases the capability, but fails to keep up with the required investment and due diligence, the ratings will lose value and won’t be reliable.”
The biggest chunk of the ESG ratings market is comprised of third-party companies like Sustainalytics, MSCI Inc. Bloomberg LP, the parent of Bloomberg News, also provides ESG data, analysis and indexes.
More acquisitions are likely to happen as the diversity of data allows larger ratings firms to increase their knowledge of the criteria used in ESG assessments, according to Axel Pierron, co-founder and managing director of capital markets consultant Opimas.
“ESG data and ratings are a huge industry as everyone will be needing it, so it’s becoming mainstream,” Pierron said in an interview.
This article was provided by Bloomberg News.