Ratings providers have been tightening their methodologies and scoring of ESG funds but there is no universal methodology for categorising firms or funds as sustainable, or for monitoring their sustainability.
- Investors will run the risk of investing in funds that are rated ‘sustainable’ but actually invest in firms with non-sustainable practises.
- ESG rating is likely to become part of the annual audit process in many jurisdictions but differences in methodology will persist.
- Questions of impartiality will persist as the accountants and rating agencies tend to be paid by the institutions they are assessing.
- Green bond issuance will surge; the Bank for International Settlements runs two green bond funds and will help to set industry standards.