Mainstreaming socially responsible investment: do environmental, social and governance ratings of investment funds converge?

The current study seeks to verify whether, despite the current mainstreaming era of socially responsible investment (SRI) and the ongoing spread of sustainable rating agencies (SRAs), there is convergent validity between environmental, social and governance (ESG) ratings assigned to investment funds. Answering this question is critical, given that SRAs are intended to lower information barriers and support investor decision-making based on ESG goals. Thus, through the ratings assigned by three major SRAs (MSCI, Refinitiv, Morningstar) to a panel of European equity mutual funds, we find low convergent validity between ratings, independent of the mission of each individual fund and ESG pillar. Our empirical results demonstrate a commensurability problem among raters and the consequent need for common conceptual and practical standards.