Earlier this fall, Senator Pat Toomey, a ranking member of the U.S. Senate Banking Committee, sent letters to ESG ratings agencies asking for clarity and transparency around the way we score companies. These letters arrived as state treasurers across the U.S. started pulling assets from asset managers with strong ESG commitments, criticizing them for prioritizing ESG concerns over shareholder returns.
Despite the politicization of ESG, Sen. Toomey is right: We do need more transparency in sustainability ratings. Transparency is a force for good: The rapid growth of ESG investing in recent years has in large part been a result of greater availability of non-financial corporate data. We now have access to more information on companies than ever before. And there is a long-established link between positive non-financial corporate performance and better returns.
