Companies Pay up to $500,000 for ESG Ratings

Companies are spending up to half a million dollars a year on a sustainability rating to meet investor demands for such data, yet are often dissatisfied with the results, new research shows.

Publicly listed companies spend, on average, between $220,000 and $480,000 on ratings-related costs per year, with their private counterparts being billed for up to $425,000, based on a survey by sustainability consulting firm ERM.

Common criticisms related to the accuracy and transparency of the data and ratings, as well as a company’s ability to correct errors, the report said.

Growing demand for environmental, social and governance (ESG) data and a reliance by many smaller investors on external providers to assess companies has driven rapid growth of the unregulated industry, drawing the attention of regulators.

The ERM report said companies’ dissatisfaction with the accuracy of ratings was based largely on their experience of finding errors in raters’ analysis of company supplied data, undermining their trust in the overall rating.