ESG ratings: Don’t throw the baby out with the bath water
ESG ratings may be flawed, but they remain the most effective way to measure the ethical behavior of companies, MIT researchers contend.
Faculty
Roberto Rigobon is the Society of Sloan Fellows Professor of Management and a Professor of Applied Economics at the MIT Sloan School of Management.
He is also 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, trying to produce alternative measures of inflation. He 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 both the "Teacher of the Year" award and the "Excellence in Teaching" award at MIT three times.
He received his PhD 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.
Berg, Florian, Julian F Kölbel, and Roberto Rigobon. Review of Finance. Forthcoming.
Jiang, Bomin, Daniel Rigobon, and Roberto Rigobon. IMF Economic Review Vol. 70, No. 1 (2022): 141-184. Download Paper.
Berg, Florian, Julian F Kölbel, Anna Pavlova, and Roberto Rigobon, MIT Sloan Working Paper 6483-21. Cambridge, MA: MIT Sloan School of Management, October 2021.
Rigobon, Roberto. MIT Sloan Management Review, August 30, 2021.
Casarin, Roberto, Matteo Iacopini, German Molina, Enrique ter Horst, Ramon Espinasa, Carlos Sucre, and Roberto Rigobon. Econometrics Journal Vol. 23, No. 2 (2020): 269-296. Download Paper.
Rigobon, Roberto. Economia Vol. 19, No. 2 (2019): 69-99. Download Paper.
ESG ratings may be flawed, but they remain the most effective way to measure the ethical behavior of companies, MIT researchers contend.
When it comes to sustainable enterprises, leaders must consider meaningful goals, consumer preferences, and the partnership of management and technology.
Differences in measurement and scope contribute to 56% and 38% of the divergencies across scores, respectively, and weights contribute 6%.
"Investors need to dive deep into the details of the different methodologies of ESG raters when the same company has different ratings."
“We need to learn to deal with the fact that that the data is imperfect ... and that decisions are very rarely considered just by all.”
Prof. Roberto Rigobon has won numerous teaching awards during his time at Sloan and is primarily recognized for his accessibility.
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