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Goldman Investment Unit Finds ‘Huge Subjectivity’ in ESG Ratings

May 12, 2022, 10:37 AM

Investors should be aware that ESG ratings lack consistency and tend to be adjusted too slowly to be of much use to fund managers, according to Luke Barrs of Goldman Sachs Asset Management.

Ratings providers often only react after “suddenly something emerges,” and “that’s too late for those investors exposed to that company,” said Barrs, GSAM’s head of fundamental equity client portfolio management in EMEA and Asia ex-Japan, in an interview. There’s also “huge subjectivity that goes into how you can determine the quality of ESG practice,” he said.

Such shortcomings in the ESG ratings industry mean active managers are ...