A few weeks ago, Florian Kiesel from the Free University of Bozen-Bolzano visited the UCD Michael Smurfit Graduate Business School for a seminar hosted by the Centre for Business and Society (CeBaS). Moderated by GreenWatch’s Fabiola Schneider, the seminar explored one of the most debated issues in Sustainable Finance: how ESG ratings should be interpreted and applied in both academia and practice.
Florian presented his paper “Do Firms Care About ESG Ratings? Evidence from Refinitiv’s Scoring Adjustment”. Read on for highlights!
The 2020 Refinitiv Shock
Refinitiv changed its methodology by no longer awarding “half points” for missing ESG disclosures (“ giving firms the benefit of the doubt”). Overnight, 86% of firms saw their scores downgraded — some by as much as 25 points. This was a wake-up call for companies that had been coasting on incomplete reporting.
How Did Firms Respond?
Companies hit hardest by negative revisions quickly professionalised their ESG processes. Within two years, the share of firms publishing sustainability reports jumped from 40% to over 80%. Similarly, sustainability committees became far more common, rising from under 40% to 60%.
What This Means
Florian’s findings highlight the feedback loop between rating agencies and corporate behaviour, and that the easiest way to recover lost ground was through disclosure. Firms improved their scores by reporting more, not necessarily by reducing emissions or changing operations. This distinction matters: ESG ratings often measure what is disclosed, not what is done — a reminder that correlation between disclosure and higher scores should not be mistaken for causality in actual sustainability outcomes.
Panel Perspectives: Beyond the Numbers
Florian wasn’t alone in unpacking the implications of ESG ratings. He was joined by two seasoned practitioners: Eoin Fahy, former Head of Responsible Investing at KBI, and Gabija Zdanceviciute of UCD/Mercer. Their contributions grounded the academic findings in the realities of investment practice and corporate reporting.
The discussion highlighted a tension familiar to anyone working with ESG data: the difference between indicator-level metrics (granular measures like emissions intensity or board diversity) and aggregate ESG scores (the single headline number investors often see). Both have value, but they serve different purposes — and conflating them can lead to misinterpretation.
Why Methodology Matters
A recurring theme was the critical importance of understanding how ESG data is constructed. Ratings are not neutral reflections of reality; they are built on methodological choices about what to measure, how to weigh it, and how to treat missing information.
For researchers, this means being transparent about which provider’s data is used and why. For investors, it means recognising that a high ESG score may reflect disclosure quality rather than operational performance.
Europe’s Shifting Disclosure Landscape
We also reflected on the emerging “omnibus” environment in Europe, where the rollback of disclosure requirements is beginning to reshape the ESG data landscape. The panel’s outlook was hopeful: once firms start reporting, they rarely stop. Florian’s paper reinforces this point, showing that very few companies discontinue disclosure once they begin.