Credit ratings clients of Moody’s, S&P received better ESG scores, SMU study finds

A SCHOLARLY investigation has found a positive correlation between the environmental, social and governance (ESG) scores given to companies by Moody’s and S&P, and their status as paying clients of the ratings agencies.

The researchers from the Singapore Management University (SMU) were careful to caveat their findings are still preliminary, but the correlation suggests score inflation can’t be ruled out and that there is a need to carefully manage conflicts of interest.

The study also found that the increase in scores was more pronounced for companies that disclosed relatively less information on their ESG performance, which the researchers said could have made it easier for manipulation to take place.