Differences in ESG ratings by Domestic and International Evaluation Agencies: The Evidence from Korea

This study examines Korea as an example of ESG ratings that appear differently for each institution. KCGS, Korea's representative ESG evaluation agency, gives high ESG scores to most companies in the KOSPI 200 index. However, MSCI and S&P, which evaluate the ESG of global companies, show very different opinions about the same company. Even though they show the same financial performance, the evaluation indicators for ESG are different. These phenomena confuse the practical standpoint of evaluating companies and considering investments in terms of ESG. As a result, if interest in ESG is not to be limited to a temporary phenomenon, it will be necessary to cross-verify ESG indicators of various institutions based on mutual trust in evaluation. To this end, we collected and compared the 2024 ESG ratings from four domestic and international ESG assessment agencies(MSCI, S&P, KCGS, Sustinvest) for the same companies. The analysis revealed that domestic rating agencies(KCSG, Sustinvest) tend to provide more favorable ratings. The substantial disparity in ESG scores assigned to identical companies by various rating agencies raises concerns about the reliability of ESG assessments. Low ESG rating reliability should prompt management and investors to consider their reliance on ESG ratings in investment decisions. Therefore, regulators should provide clear guidelines for ESG assessments, covering evaluation principles, scope, methodologies, and factor weighting to improve consistency. This paper highlights the urgent need for further research on ESG rating inconsistencies.