The challenge of evaluating the environmental and social impact of companies’ operations and products has become a first order concern in the world. For instance, consumers would like to purchase products from companies that produce in ways that respect certain values – such as environmental protection, women empowerment, absence of child labor, etc.; governments would like to understand the impact companies have on communities – either for regulation or guidance; and investors would like to know if they are financing activities that might pose a reputational risk.

As of today, agencies assign environmental social and governance (ESG) ratings to firms in order to gauge to what extend firms behave in a socially responsible way. But these ratings diverge substantially between different rating agencies.  In fact, if we take two of the top five ESG rating agencies and compute the rank correlation across firms in a particular year, we are likely to obtain a correlation of the order of 10 to 15 percent. At least the correlation is positive! It is very likely (about 5 to 10 percent of the firms) that the firm that is in the top 5 percent for one rating agency belongs to the bottom 20 percent for the other. This extraordinary discrepancy is making the evaluation of social and environmental impact impossible.

But how can we eliminate discrimination in the labor force if we are unable to measure it? How on earth are we going to be able to produce safer goods and services for consumers if we can’t agree on how to size their impact? If we want managers, consumers, governments and investors to take the right decisions, we need to provide them with much better guidance. This is the purpose of Aggregate Confusion.

Technically speaking, we will disentangle the three sources of divergence of ESG ratings:  different aggregation procedures, different information sets, and different approximations for the underlying aspects they are interested in measuring. In other words we want to quantify how much could be improved by taking a different approach to the already existing data. And with that we hope to reinvigorate the debate on how to improve those ratings.

Project Team

Roberto Rigobon

Roberto Rigobon is the Society of Sloan Fellows Professor of Applied Economics at the Sloan School of Management, MIT, a research associate of the National Bureau of Economic Research, a member of the Census Bureau’s Scientific Advisory Committee, and a visiting professor at IESA. 

Roberto is a Venezuelan economist whose areas of research are international economics, monetary economics, and development economics. Roberto focuses on the causes of balance-of-payments crises, financial crises, and the propagation of them across countries - the phenomenon that has been identified in the literature as contagion. Currently he studies properties of international pricing practices, try to produce alternative measures of inflation, and is one of the two founding members of the Billion Prices Project, and a co-founder of PriceStats.

Roberto joined the business school in 1997 and has won three times the "Teacher of the year" award and three times the "Excellence in Teaching" award at MIT. He got his Ph.D. in economics from MIT in 1997, an MBA from IESA (Venezuela) in 1991, and his BS in Electrical Engineer from Universidad Simon Bolivar (Venezuela) in 1984. He is married with three kids.

Julian Koelbel

Julian received his PhD from ETH Zurich, at the chair for Sustainability and Technology. Prior to that, Julian completed an MSc in Water Science, Policy and Management at the University of Oxford and a BSc in Environmental Science at ETH Zurich.

Besides academia, Julian has been working as an analyst at RepRisk AG, as researcher at the Applied Research Institute of Jerusalem in Bethlehem (ARIJ), and as an auditor in sustainable asset management at the private bank Vontobel.

Florian Berg

Florian is currently a research fellow at the MIT Sloan School of Management. He received his PhD in economics from Paris-Dauphine University.  During his PhD, he held a visiting research position at ETH Zurich. He also holds a BSc in economics and a MSc in financial engineering from Paris-Dauphine University.

Florian worked as a quantitative researcher at Amundi Asset Management and as a quantitative strategist/ trader at Alphadyne Asset Management. He also lectured portfolio management and fixed income analysis on the satellite campus in New York of Paris-Dauphine University.

Joana Pinto Leite

Joana is originally from Lisbon. She is very passionate about reinventing the structure and measurement of inclusive and sustainable social sectors. She is a dual-degree at MIT Sloan School of Management and Harvard Kennedy School, particularly interested in the intersection of strategy, investment, as well as innovation in vulnerable contexts.

Joana is an economist and she worked for three years in investment management and for three years in consulting in a telecommunications company in Portugal. Apart from work, she led a national Portuguese NGO focused on promoting social cohesion amongst children from different socio-economic backgrounds; and she have traveled solo to work on projects on the ground with local communities in developing countries, such as Colombia, Haiti, East-Timor, Vietnam, Thailand and India.

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