“The SEC’s 2021 report, which is based on exams of ratings firms, said that by adding ESG factors, ratings firms may deviate from their usual methodologies, policies or procedures which may not be properly disclosed to investors, the SEC said.
Adding ESG ratings also raises the risks of new conflicts of interest if firms feel pressure to give higher ESG ratings than warranted when the subject is also a client, the SEC said.”
[COMMENTARY]The SEC raises valid concerns. How they can be handled is an open question.
U.S. markets regulator flags risks for ratings firms in ESG boom, by Chris Prentice, February 1, 2022, Reuters, USA.