SPUR Recap: Impact of Controversies on ESG Ratings

Alisha Vekaria Headshot
During the spring of 2020, Alisha Vekaria (BS '22) completed a SPUR project with the Center for Sustainable Business. Read on to learn more about her experience:

Name: Alisha Vekaria
Year: 2022
Concentration: Finance & Sustainable Business

Briefly describe the project you worked on with CSB (both the topics of focus and the deliverable you produced).
During the Spring 2020 semester, I worked with the CSB team to analyze the impact of controversies and bad press on companies’ environmental, social, and governance (ESG) ratings. My specific focus was on the “S” or social category within ESG. Initially, I was conducting exploratory research on corporate controversies related to labor rights, child labor, and unions’ rights among other social issues. After finding cases related to companies including Apple, Chipotle, and General Motors, I parsed each company’s data set of “S” scores for the date ranges I needed in order to generate graphs and descriptive statistics showcasing the level of impact of these events on the scores. In addition to this quantitative analysis, my final deliverables included presenting my findings and the repository-like spreadsheet of negative events I created with event descriptions, timelines, and outcomes to the CSB team.

In your own words, why do you think this research is important?
One of the most pressing challenges related to the growing emphasis on ESG is the lack of consistency in the ESG data reported by various companies and agencies. It is difficult to truly understand what aspects are being used to formulate the rankings or scores that the public ultimately ends up seeing because for every set of ESG scores or rankings there is a unique set of components being used to calculate the results. Consequently, research like this is extremely important because it resembles a deep-dive into the methodology and reliability of a specific data provider. As with my project, if such extreme and negative controversies are not being reflected properly in ESG rankings or scores, there leaves room to wonder whether the data provider is holistically capturing and representing a company’s ESG performance. 

How did this project prepare you for future classes/projects at Stern? For your future career path?
One of the main aspects from this research project that resonated with me especially as I continue to pursue classes and opportunities in the ESG/sustainability space is the importance of analyzing data at all levels, beginning with the core methodologies and tracking it all the way to the final output. I was genuinely shocked by some of my findings and how they did not always reflect my expectations, and as ESG data and reporting continues to evolve, I am excited to see how ESG data services providers shift and expand their calculation methodologies to provide the most accurate data.