Patchwork of ESG Ratings Sow Investor Confusion as Flows Surge

As trillions of dollars flow into ESG strategies, global investors are becoming frustrated with the hodge-podge of standards and ratings designed to guide their allocation decisions and are clamoring for more uniform rules.

Dimensional Fund Advisors, the U.S. giant with about $637 billion under management, is telling clients to take ESG ratings with a grain of salt, treating them like buy or sell ratings on a stock. Investors are better off working out their sustainability priorities and picking through raw data instead of relying on the myriad of ratings that have sprung up.

“We generally don’t advocate taking a ...