Hello, welcome to Impact Insights, the podcast series of Astaire Investment Managers.

The strengths of impact investment strategies lies in the clarity of the goal. Invest in

well-armed businesses seeking to solve global problems. Many ESG investment strategies

position themselves as having the same ambition.

Are actually ESG ratings appropriate to measure impact?

Today's podcast episode features Natasha Gerda, head of research at Esteria.

Environmental, social and governance ratings assess how a company deals with sustainability challenges,

no matter what the company is doing, in which sector they are active, or in which industry they are. So it really assesses how material risks and opportunities

are integrated in the overall company's strategy. So ESG measures the impact of a company's

operation, how it assesses the potential impact of the world on the company and its shareholders.

ESG ratings do not measure a company's contribution to positive impact on the planet or the people.

So today, there are about 160 ESG data providers, including the biggest corporate credit rating agencies,

financial information database such as Bloomberg or Refinitive.

They all compete to sell sustainability ratings and data to investment managers.

They often disagree with one another.

There's a lot of academic research that shows that different providers of ESG ratings come to a radical different conclusion about the ESG commitments, especially of big companies,

and sometimes very widely.

So that's because ESG rating providers use its own propriety systems,

algorithms, metrics, definition, and sources of non-financial information, most of which are not very transparent

and do rely heavily on self-reporting by companies they rate. So there is no regulation

today that examines the mythology of these rating agency and neither the results of what

they sell. So there needs to be a connection between an ESG mythology and what you are trying

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