Don't trust ESG ratings

An environmental, social, and governance rating that overlooks the imminent likelihood of bankruptcy is worthless.

The electric vehicle maker, Fisker, Inc. declared bankruptcy last week, representing the loss of roughly a billion dollars of investor capital. Yet only a month ago, Sustainalytics gave Fisker a “Medium Risk” ESG rating, the same as Tesla, and suggested that Fisker was average for its industry. Sustainalytics seemed to miss the most important sustainability issue of all: the sustainability of the company itself.