- Scope divergence refers to the situation where ratings are based on different sets of attributes. Attributes such as carbon emissions, labor practices, and lobbying activities may, for instance, be included in the scope of a rating. One rating agency may include lobbying activities, while another might not, causing the two ratings to diverge.
- Measurement divergence refers to a situation where rating agencies measure the same attribute using different indicators. For example, a firm’s labor practices could be evaluated based on workforce turnover, or by the number of labor-related court cases taken against the firm.
- Weights divergence emerges when rating agencies take different views on the relative importance of attributes.
- Varying ESG performance ratings may influence asset prices.
- The divergence hampers the ambition of companies to improve their ESG performance because they receive mixed signals from rating agencies about which actions are expected and will be valued by the market.
- The divergence of ratings poses a challenge for empirical research, as using one rater versus another may alter a study’s results and conclusions.
 PRI. PRI Annual Report, 2018.