sustainability

Article
Do ESG Ratings of Chinese Firms Converge or Diverge? A
Comparative Analysis Based on Multiple Domestic and
International Ratings
Yunfu Zhu , Haoling Yang and Ma Zhong *

College of Economics and Management, Nanjing Forestry University, No. 159 Longpan Road, Xuanwu District,
Nanjing 210037, China; [email protected] (Y.Z.); [email protected] (H.Y.)
* Correspondence: [email protected]

Abstract: Since the Chinese economy has transitioned to a sustainable model, the Chinese socially
responsible investment (SRI) market has expanded rapidly, which has deeply stimulated the develop-
ment of environmental, social, and governance (ESG) ratings for Chinese firms. Domestic agencies,
such as SynTao, Rankins (RKS), Sino-Securities (SSII), and China Alliance of Social Value Investment
(CASVI), and international agencies, such as Bloomberg, FTSE Russell (FTSE), and Morgan Stanley
Capital International (MSCI), have launched their own ESG rating systems. These emerging ratings
may provide users of information with more diverse references; however, if their results are too
divergent, they may also confuse users. To what extent do these ESG rating results in the Chinese
market converge or diverge? Aiming to answer this question, we used Hushen 300 index firms in
2019 as the initial sample, and selected 195 firms covered by the above seven ratings for the analysis.
Firstly, by comparing the overlap in the top 100 lists of these sample firms, we found that the list
overlap rate between each pair of ratings was between 66.36% and 82.35%; however, only 35% of the
firms were listed in the top 100 of all seven ratings. Furthermore, the Pearson correlation analysis
showed that the correlation coefficients between each pair of ratings ranged from 0.057 to 0.736, and
the average was only 0.411. These results suggest a wide divergence in the ESG rating results for
Chinese firms. We suggest that information users need to consider a more diverse and comprehensive
Citation: Zhu, Y.; Yang, H.; Zhong, M.
perspective when utilizing these ratings.
Do ESG Ratings of Chinese Firms
Converge or Diverge? A
Comparative Analysis Based on Keywords: ESG ratings; emerging markets; rating divergence; corporate sustainability
Multiple Domestic and International
Ratings. Sustainability 2023, 15, 12573.
https://doi.org/10.3390/
su151612573 1. Introduction
Academic Editors: Yaowen Shan, After nearly two decades of rapid growth, China has become the world’s second-
Quanxi Liang and Meiting Lu largest economy, and the largest developing economy. However, given this radical eco-
nomic development, various environmental and social scandals have continuously broken
Received: 1 August 2023 out, e.g., the Sanlu milk scandal in 2008 [1] and the Zijin Mining scandal in 2010 [2], and
Revised: 16 August 2023
the problems in Chinese society that are associated with sustainable development have
Accepted: 17 August 2023
become more prominent [3]. In this regard, the sustainable transformation of economic
Published: 18 August 2023
growth was necessary, and the Chinese government has made many attempts, such as
promulgating a new environmental law in 2015, and so on. Spurred by sustainable trans-
formation, the Chinese socially responsible investment (SRI) market has grown rapidly.
Copyright: © 2023 by the authors.
According to Syntao [4], the total size of the Chinese SRI market reached approximately
Licensee MDPI, Basel, Switzerland. RMB 24.6 trillion in 2021. The SRI market drives the development of ESG ratings for
This article is an open access article Chinese firms. For example, local sustainability consultancies SynTao and Rankins (RKS)
distributed under the terms and launched their respective ESG rating services in 2015 and 2019, respectively; international
conditions of the Creative Commons agencies Bloomberg, FTSE Russell (FTSE), and Morgan Stanley Capital International (MSCI)
Attribution (CC BY) license (https:// are also expanding their coverage of Chinese listed firms (e.g., FTSE ESG’s coverage of
creativecommons.org/licenses/by/ Chinese firms was only 30 in 2018, but reached 679 in 2019). The ratings issued by different
4.0/). agencies bring many references and information to users, but may cause confusion if their

Sustainability 2023, 15, 12573. https://doi.org/10.3390/su151612573 https://www.mdpi.com/journal/sustainability

Sustainability 2023, 15, 12573 2 of 17

results show excessive divergence. Using recent academic research as an example, among
the 41 pieces of literature collected in this paper on the topic of Chinese ESG, most only use
two or fewer ratings (92.68%) as a proxy for ESG performance or disclosure, and 53.66%
use only one rating. If ESG ratings diverge too much, the reliability and robustness of the
conclusions of these studies may be in doubt. Therefore, we raise the following research
questions: do significant divergences exist? To what extent do these ESG rating results
converge or diverge?
In view of the above questions, we used 195 Hushen 300 index firms commonly covered
by seven domestic and international ESG ratings in 2019 as samples to evaluate their conver-
gence (the above seven ESG ratings are considered by some studies to have an important
impact on the Chinese market, e.g., Li, Yin, and Liu (2022) [5] and Liu (2022) [6]). First, we
investigated the overlap between the top 100 lists of these sample firms covered by all seven
ratings, and the results showed that the overlap rates are not high, e.g., the overlap rate
among all ratings is only 35%. Then, the correlation analysis showed similar results, e.g., that
the correlation coefficient between the pairwise ratings is between 0.057 and 0.736, and the
average coefficient is only 0.411. The above results suggest that these ratings of Chinese
firms show high divergence (low convergence). Therefore, we suggest that researchers and
investors need to compare and synthesize these ratings. The contributions of this paper
are mainly that it enriches the research on the validity of ESG ratings [7–14], supplements
the recognition of ESG rating divergence (convergence) in the Chinese market, and helps
investors and researchers interested in the Chinese market to more intuitively understand
the various ESG rating results in the Chinese market.
This study has five sections. Section 2 presents the background and develops a
rating system comparison on ESG ratings in the Chinese market. Section 3 conducts a
convergence analysis of these ESG ratings. Section 4 contains the discussion, and Section 5
draws the conclusions.

2. Background and Comparison of ESG Ratings in China

2.1. Background of ESG Ratings in China
2.1.1. Advent and Development of ESG Ratings in China
Table 1 summarizes the development of domestic and international ESG ratings for
Chinese firms. As an established sustainability consultancy in China, SynTao was the first
domestic agency to carry out an ESG rating business in 2015. Its initial rating range only
covered Hushen 300 firms, and then was expanded yearly until 2022 to cover all A-share
listed firms. In 2017, the financial index firm SSII and nongovernmental organization
CASVI also started to provide ESG ratings. However, the coverage of the two ratings
varies widely, with SSII covering all A-share listed firms, and CASVI only covering the
Hushen 300. In 2020, corporate social responsibility (CSR) consultancy RKS ceased its
original CSR ratings business, and transformed to provide ESG rating services covering
CSI 800 index firms. Bloomberg offered the first international ESG rating to cover firms in
the Chinese market. Its database shows that its earliest ESG rating year involving a Chinese
A-share firm is 2011. MSCI’s involvement came after it included Chinese A-share firms
in its emerging market index and global index in 2018, and began offering ESG ratings
for Chinese A-share firms in 2019. Similarly, FTSE Russell began assigning ESG ratings to
Chinese A-share firms after covering them in its global index in 2019.

2.1.2. Application of ESG Ratings in China

Investigating the application of ESG ratings by market practitioners is limited by
objective factors. Therefore, we collected 41 studies from the last five years that address
or are related to ESG issues in the Chinese market, and that each study included the
determinants or economic consequences of ESG performance or disclosure (ESG ratings
are used in their research design; a brief description of the literature collection is reported
in Appendix A). We counted the application of seven ESG ratings, as described below.
Sustainability 2023, 15, 12573 3 of 17

Table 1. Basic information on ESG ratings.

Rating Category Start Time Attributes Coverage

Approximately 860 A-share firms in 2011, over
Bloomberg International 2006 Index/data provider
1200 after 2020
Covering 30 in 2018, rising to 679 in 2019, and
FTSE International 2019 Index/data provider approximately 900 A-share listed firms by the end
of 2022
Covering 5% of A-share listed firms in 2018, raised
MSCI International 2018 Index/data provider
to 20% in 2019
Hushen 300 (2015), CSI 500 (from 2018), now
SynTao Domestic 2015 Consultancy
covering all A-share listed firms
RKS Domestic 2020 Consultancy CSI 800
SSII Domestic 2017 Index/data provider All A-share listed firms
CASVI Domestic 2017 NGO Hushen 300

Firstly, regarding the agency category, in all 41 studies, domestic ESG ratings were
used 35 times (85.37%), and international ESG ratings were used 25 times (60.98%) (Since
some studies used two or more ratings simultaneously, the sums of the relevant proportions
calculated in this paper are not equal to 100%. For example, when Tian (2022) [15] studied
the impact of ESG performance on corporate trade credit financing, SSII ESG was used as a
proxy in the main analysis. Bloomberg ESG was used for robustness). Concretely, as shown
in Figure 1, in the literature using domestic ratings, the frequencies (rates) of SSII, SynTao,
CASVI, and RKS were 20 (48.78%), 8 (19.51%), 4 (9.76%), and 3 (7.32%), respectively. Among
them, SSII is the most frequently used, which may be due to its widest coverage (covering
all A-share listed firms). In the literature using international ratings, the frequencies (rates)
of Bloomberg, MSCI, and FTSE were 18 (43.90%), 5 (12.20%), and 2 (4.88%), respectively.
Perhaps because Bloomberg covers Chinese firms at the earliest times and has a larger
reach, it is the most used. Among all of the ratings, the top three most-used were SSII
(48.78%), Bloomberg (43.90%), and SynTao (19.51%).
Secondly, as shown in Figure 2, the number of studies using two or fewer ratings
in one study was the largest (38 papers, accounting for 92.68%); 53.66% of the studies
(22 papers) used only one rating; and only 7.32% (3 papers) used three or more ratings. If
there is a large divergence between different ratings, the conclusions of these studies may
suffer from robustness issues. For developed capital markets, scholars carried out some
studies on ESG divergence and came to similar conclusions to those we advocate, that this
robustness issue is widespread [7,9,16].

2.2. Comparison of Various ESG Ratings

We made a comparison from three aspects: metric system, information source and
operating process:
(1) Metric system. As shown in Panel A of Table 2, all of the six ratings but CASVI have
environment, social, and governance as level-1 dimensions. There is a wide variation in the
number of underlying metrics for each rating, with the fewest indicators being SSII (includ-
ing 26 indicators) and the most being FTSE (including over 300 indicators). Thus, we present
a comparative analysis using the related topics of the indicators as classification dimensions,
and the results are reported in Table 2 Panel B. Regarding the environmental dimension,
all seven ratings involved “Climate change”, “Sewage discharge”, “Environmental supply
chain”, “Exhaust gas emission”, and “Solid waste discharge”. Furthermore, “Biodiversity”,
“Water resource management”, “Negative environmental events”, and “Green purchasing”
received attention from each rating, except for CAVSI. The social dimension varied greatly,
and the issues of most concern were “Health and safety”, “Supply chain management”,
“Employee compensation”, and “Product safety”. However, international rating agencies
pay more attention to “Human rights”, while Chinese domestic agencies pay more attention
to “Corporate donation”, “Information security”, and “Inclusive finance”. Regarding the
Sustainability 2023, 15, 12573 4 of 17

governance dimension, the issues with the most concerns were “Audit and supervision”,
“Board structure”, “Independent directors”, “Fighting corruption”, and “Business ethics”.
Specifically, domestic institutions (such as SSII and CASVI) pay attention to creditor rights
and interests. In the Chinese economy, debt financing plays a dominant role. The balance of
RMB loans in the real economy at the end of 2019 accounted for 60.3% of the social financ-
ing stock during the same period, according to the 2019 Social Financing Stock Statistics
Report. The balance of entrusted loans was 4.6%; the balance of trust loans was 3%; the
balance of undiscounted bank acceptance bills was 1.3%; the balance of corporate bonds
was 9.3%; the balance of government debt was 15%; and the balance of domestic stocks of
nonfinancial firms was 2.9%. Finally, each rating has different practices in determining the
indicator weights. For example, MSCI sets weights based on the length and magnitude
of the expected impact of an ESG issue; FTSE calculates weights based on the exposure of
issues; and RKS ratings determine weights based on investor attention to the issue.

Table 2. Comparison of ESG rating metric systems.

Panel A
Rating Number of Underlying
Framework Level Level-1 Division
Agency Metrics
Bloomberg 3 Environment, social, and corporate governance 61
FTSE 3 Environment, social, and corporate governance 300+
MSCI 3 Environment, social, and corporate governance 37
SynTao 3 Environment, social, and corporate governance 200+
RKS 3 Environment, social, and corporate governance 37
SSII 3 Environment, social, and corporate governance 26
Objective (driving force), approach (innovation), effectiveness
CASVI 4 55
(implementation)
Panel B
Dimension Issue Bloomberg FTSE MSCI SynTao RKS SSII CASVI Frequency
√ √ √ √ √ √ √
Solid waste discharge √ √ √ √ √ √ √ 7
Climate change √ √ √ √ √ √ √ 7
Sewage discharge √ √ √ √ √ √ √ 7
Environmental supply chain √ √ √ √ √ √ √ 7
Exhaust gas emission √ √ √ √ √ √ 7
Biodiversity √ √ √ √ √ —
√ 6
Environment Water resource management √ √ √ —
√ √ √ 6
Negative environmental events √ √ —
√ √ √ √ 6
Green purchasing √ √ √ — √ √ 6
Energy issues —
√ √ —
√ √ 5
Green products —
√ — √ √ √ — 4
Renewable energy management — √ —
√ — 4
Packaging materials — — — — — 2
√ √ √ √ √ √ √
Health and safety √ √ √ √ √ √ √ 7
Supply chain management √ √ √ √ √ √ √ 7
Product safety √ √ √ √ √ √ √ 7
Employee compensation √ √ √ √ √ √ 7
Staff training —
√ √ √ √ √ 6
Negative events —
√ √ —
√ √ √ 5
Society Communities √ —
√ — √ √ √ 5
Customer management — √ —
√ √ √ 5
Corporate donation —
√ — — √ √ √ 4
Employee diversity — —
√ √ √ —
√ 4
Information security —
√ —
√ √ √ — 4
Human rights √ —
√ —
√ — 4
Inclusive finance —
√ —
√ —
√ √ √ √ —
√ 4
Fighting corruption √ √ √ √ √ √ √ 7
Board structure √ √ √ √ √ √ √ 7
Independent directors √ √ √ √ √ √ 7
Audit and supervision √ √ √ √ —
√ √ 6
Business ethics √ — √ √ √ 6
Governance Executive compensation — — — 4
√ √ √ √
Risk management — √ —
√ —
√ √ 4
Tax transparency — √ √ — √ —
√ 4
ESG disclosure — — — √ √ 4
Debt-paying ability — — — — — 2
√
Note: the data are collected manually. A “ ” indicates that the issue is involved in this rating, and a “—” indicates
that it is not involved. The “Frequency” column represents the number of ratings that focus on the issue.
Sustainability 2023, 15,
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Figure
Figure 1.
1. Frequency
Frequency of
of use
use of
of ESG
ESG ratings
ratings in
in recent years in
recent years in Chinese ESG-related studies.
Chinese ESG-related studies. Note:
Note: rate
rate
of use
Figure is
1.in parentheses.
Frequency of use of ESG ratings in recent years in Chinese ESG-related studies. Note: rate
of use is in parentheses.
of use is in parentheses.

Figure 2. Numbers of ESG ratings used in China ESG studies in recent years. Note: “1” and “2”
indicate
Figure 2.that the paper
Numbers usesratings
of ESG only one andintwo
used types
China ESG of studies
ESG ratings, and years.
in recent “3/3+”Note:
indicates that “2”
“1” and the
2. Numbers
Figureuses
paper three or of ESG
more ratings
ESG used
ratings. in China
Note: numberESGof studiesisininrecent
papers years. Note: “1” and “2”
parentheses.
indicate that the paper uses only one and two types of ESG ratings, and “3/3+” indicates that the
indicate that the paper uses only one and two types of ESG ratings, and “3/3+” indicates that the
paper uses three or more ESG ratings. Note: number of papers is in parentheses.
paper uses three or more ESG ratings. Note: number of papers is in parentheses.
Sustainability 2023, 15, 12573 6 of 17

(2) Information source. A comparison of the information sources is reported in

Table 3. Among them, the information sources of each rating are based on the firm’s
public announcements, mainly including annual and CSR/ESG reports; however, there are
differences in other supplementary information. Ratings such as MSCI and SynTao include
corporate social media disclosures in their sources; FTSE uses a more proactive strategy,
including communicating with the rated firms to investigate their undisclosed information.
However, none of the ratings mention the weights (or a similar description) of different
sources in their ratings.

Table 3. Comparison of information sources for ESG ratings.

Rating Agency Information Sources Claimed by the Rating Agency

Bloomberg Public information such as the firm’s sustainability reports, financial statements, website, and press releases.
FTSE Mainly from public information from listed firms, regulators, news media, and other NGOs.
MSCI Public data: government, regulatory, and NGO datasets; firm disclosure documents; 3400 media sources.
SynTao The positive information mainly comes from the independent disclosure of firms, while the negative
information comes from the independent disclosure of firms, media reports, announcements of regulatory
authorities, and surveys of social organizations.
RKS Mainly comes from the information independently disclosed by the firm, including the firm’s annual report,
corporate social responsibility report, and articles of association.
SSII Open data based on a machine learning and text mining algorithm that crawls the website data of the
government and relevant regulatory authorities, news media data, etc.
CASVI Public information, including the firm’s annual report, social responsibility report, government departments
and third-party announcements, etc.

(3) Operating process. All ratings basically follow these four processes: a. gather raw
information; b. sort the raw information and fill in the underlying metrics; c. summarize
the underlying metrics to form the rating score; and d. review the scores to form the final
result. However, the specific process details of ratings differ. A review process is used as
an example (as shown in Table 4): Bloomberg and SynTao adopt only internal reviews,
while other agencies adopt external reviews or joint internal and external reviews. In
addition, none of the ratings are cross-reviewed or communicated to other peers (e.g., other
ESG rating agencies). According to the illustration released by the ratings, there was no
cross-review or communication with peers for not only the review process, but also for
other processes.

Table 4. Comparison of review processes for ESG ratings.

Rating Agency Review Process

Bloomberg Review the scoring framework internally and establish communication channels with the firm.
FTSE Oversight by external committees set up by businesses, investors, nonprofit organizations, experts, and academics.
MSCI Invite the evaluated firms to review relevant information and data before issuing the final score.
SynTao Conduct cross audits within the organization.
A technical committee composed of experts and scholars from external universities and research institutions
RKS
can review the rating results.
SSII An ESG expert committee is set up to review the rating results.
CASVI Hire data experts to review and verify information with regulatory authorities and industry associations.

The above comparative analysis results show that each ESG rating has its own pref-
erence in terms of its metric system, information source, and process design, and there is
a lack of a cross-review or communication mechanism among the ratings. This situation
intensifies our concern over the convergence (divergence) problem among the rating results.
Sustainability 2023, 15, 12573 7 of 17

3. Analysis for the Convergence/Divergence of Chinese ESG Ratings

3.1. Analysis Design
In this section, we used the 2019 Hushen 300 index firms as the initial sample and
filtered out 195 sample firms that are jointly covered by all seven agencies. Referring
to the historical studies [7,9,11,14,16], we used ranking overlap analysis and correlation
analysis to intuitively show the convergence/divergence between these ratings. First, we
investigated the overlap of these sample firms ranked in the top 100 list of each rating (We
also attempted to analyze the extent of overlap between the top 50 and top 30 lists and
finds similar results. For brevity, this will not be repeated, and related results are available
from the authors on request). Then, we conducted correlation analysis on the rating scores
of these sample firms.

3.2. Sampling Process

The original sample was the firms in the Hushen 300 Index of 2019 for the following
reasons. First, the firms in the Hushen 300 index are sufficiently representative in terms of
coverage. In 2019, the total market value of the firms in the Hushen 300 index accounted
for 80.96% of all A-share listed firms in China (calculated using market capitalization data
in the CSMAR database), and most were also included in various international indices
(e.g., the MSCI Global Index). Second, since the outbreak of COVID-19 in 2020, strict
Chinese prevention and control measures have severely affected various corporate activities,
including ESG activities (Regarding a direct impact, COVID-19 has affected the focus of
corporate ESG activities. For example, many firms have shifted their focus to social issues,
such as anti-epidemic donations. Regarding indirect impacts, strict epidemic control has
restricted business activities and has reduced firms’ profitability, forcing some to scale back
substantial investments in sustainable responsibility). To avoid these effects, we chose
2019—before the outbreak of the pandemic—as the sample period in this paper.
The screening process of the sample is reported in Table 5. Among the ratings, SSII has
the largest coverage of all 3775 A-share listed firms, while CASVI has the smallest coverage
of 410 firms. Among the international ratings, Bloomberg has the largest coverage (1207),
and MSCI has the smallest coverage (580). For the Hushen 300 firms selected in this paper,
the number of firms covered by domestic ratings ranges from 268 (CASVI) to 300 (SSII),
and the international ratings cover from 250 (Bloomberg) to 283 (MSCI). In the end, 195
Hushen 300 firms at all seven levels of institutions were fully covered.

Table 5. Samples selection.

Number of Hushen 300

Total Number of Chinese Number of Hushen 300
Rating Agency Firms Commonly Covered
Firms Covered in 2019 Firms Covered in 2019
by All Ratings in 2019
Bloomberg 1207 250 195
FTSE 679 255 195
MSCI 580 283 195
SynTao 1267 279 195
RKS 790 294 195
SSII 3775 300 195
CASVI 410 268 195

3.3. Descriptive Statistics

Table 6 reports the descriptive statistics, including observation, mean, standard devia-
tion (SD), median, and so on, of ESG rating scores based on the 195 sample firms. Panel
A shows the statistical results before standardization, in which Bloomberg, FTSE, MSCI,
SynTao, and RKS publish continuous scores, with means (medians) of 30.55 (28.93), 1.59
(1.6), 37.71 (35.16), 52.12 (51.13), and 2.97 (2.69), respectively. The results published by SSII
and CASVI are graded scores that are converted into corresponding scores according to
their grades in this paper (The SSII rating contains nine grades: AAA, AA, A, BBB, BB, B,
Sustainability 2023, 15, 12573 8 of 17

CCC, CC, and C. Therefore, we transformed this rating into 0 to 9. The CASVI rating con-
tains 20 grades (from D to AAA), and we transformed it into 0 to 20), with means (medians)
of 5.03 (4) and 11.97 (12), respectively. To further directly compare the differences among
the results of the ratings, we reported the statistics in panel B after 0–1 standardization.
The scoring results of Bloomberg, FTSE, MSCI, SynTao, and RKS are more conservative,
with the mean (median) ranging from 0.354 (0.353) to 0.452 (0.458), with all being less than
0.5. Meanwhile, the results of SSII and CASVI are more optimistic, with means (medians)
of 0.605 (0.6) and 0.61 (0.611), respectively, both being higher than 0.5. The above results
indicate that the scoring results of different ratings have different tendencies: relatively, the
ratings of Chinese firms by international agencies are more conservative; among domestic
ratings, established sustainability consultants SynTao and RKS also report more conserva-
tive results, but the financial index firm SSII and nongovernmental organization CASVI are
more optimistic.

Table 6. Descriptive statistics of ESG rating scores.

Panel A (Before 0–1 Standardization)

Rating Agency N Mean SD Min P25 P50 P75 Max Scoring Range
Bloomberg 195 30.55 10.52 11.98 21.49 28.93 39.26 59.92 0.1–99
FTSE 195 1.59 0.54 0.50 1.20 1.60 2.00 2.90 0–5
MSCI 195 37.71 16.29 3.17 26.53 35.16 49.58 81.02 0–100
SynTao 195 52.12 6.39 39.13 47.63 51.13 56.75 71.88 0–100
RKS 195 2.97 1.45 0.76 1.85 2.69 3.84 7.00 0–7
SSII 195 5.03 1.11 2.00 2.00 4.00 5.00 6.00 0–9
CASVI 195 11.97 4.01 1.00 10.00 12.00 15.00 19.00 0–20
Panel B (After 0–1 Standardization)
Rating Agency N Mean SD Min P25 P50 P75 Max Scoring Range
Bloomberg 195 0.387 0.220 0.017 0.198 0.353 0.569 0.879 0–1
FTSE 195 0.452 0.226 0.042 0.292 0.458 0.625 0.958 0–1
MSCI 195 0.444 0.209 0.005 0.300 0.411 0.596 0.952 0–1
SynTao 195 0.397 0.195 0.027 0.260 0.366 0.538 0.905 0–1
RKS 195 0.354 0.232 0.010 0.175 0.309 0.494 0.952 0–1
SSII 195 0.605 0.221 0.000 0.400 0.600 0.800 1.000 0–1
CASVI 195 0.610 0.223 0.000 0.500 0.611 0.778 0.944 0–1

3.4. Ranking Overlap Analysis

Table 7 shows the results of the analysis of the overlap based on the top 100 lists for
each rating among the 195 sample firms, where panels A and B represent the results of
the overlap frequency and rate of the rankings, respectively (When there was a difference
in the number of top 100 lists between two ratings, we calculated the overlap rate using
the smaller number as the denominator. For example, the top 100 list of the SSII contains
133 firms, the CASVI contains 119, and the number of firms covered by the two together
is 98, so the overlap rate is 82.35% = (98/119) × 100%). The diagonal line in panel A
shows the number of the top 100 sample firms in each rating. Due to the use of the
grade rating system, the top 100 of SSII and CASVI contain 133 and 119 sample firms,
respectively. The frequency of the top 100 firms that overlap each rating are in each column.
For example, column (1) of panel A and column (1) of panel B show the frequency and
rate of overlapping firms between Bloomberg and other ratings, respectively (As noted
above, we used the lesser of the two ratings as the denominator, and the overlap rate
(between the two ratings) = (84/103) × 100% = 81.5%); the lowest is Bloomberg with
CASVI, with an overlap frequency (rate) of 75 (72.82%). For the statistics of the pairwise
overlap of all ratings, the lowest overlap occurs between FTSE and CASVI, with a frequency
(rate) of overlap of 71 (66.36%). The highest overlap frequency (rate) is 98 (82.35%). Finally,
we reported the overlap of international agencies, domestic agencies, and all agencies: the
Sustainability 2023, 15, 12573 9 of 17

overlap frequency (rate) of the top 100 lists of three international ratings (Bloomberg, FTSE,
and MSCI) is 57 (57% = 57/100); the frequency (rate) of overlap among the four domestic
ratings (SynTao, RKS, SSII, and CASVI) is 46 (46%); and the frequency (rate) of overlap
among all seven ratings is only 35 (35%), which means that only approximately one-third
of the sample firms are jointly recognized by the seven ratings in the top 100.

Table 7. Overlap of top 100 firms of different ratings.

Panel A (Overlap Frequency of the Top 100 Sample Firms)

Bloomberg FTSE MSCI SynTao RKS SSII CASVI
(1) Bloomberg 103
(2) FTSE 84 107
(3) MSCI 77 78 100
(4) SynTao 81 78 72 100
(5) RKS 82 77 75 74 100
(6) SSII 81 82 77 78 77 133
(7) CASVI 75 71 71 69 70 98 119
(8) Overlap frequency of international ratings: 57
(9) Overlap frequency of domestic ratings: 46
(10) Overlap frequency of all ratings: 35
Panel B (Overlap Rate of the Top 100 Sample Firms)
Bloomberg FTSE MSCI SynTao RKS SSII CASVI
(1) Bloomberg 100%
(2) FTSE 81.55% 100%
(3) MSCI 77.00% 78.00% 100%
(4) SynTao 81.00% 78.00% 72.00% 100%
(5) RKS 82.00% 77.00% 75.00% 74.00% 100%
(6) SSII 78.64% 76.64% 77.00% 78.00% 77.00% 100%
(7) CASVI 72.82% 66.36% 71.00% 69.00% 70.00% 82.35% 100%
(8) Overlap rate of international ratings: 57%
(9) Overlap rate of domestic ratings: 46%
(10) Overlap rate of all ratings: 35%

3.5. Correlation Analysis

Table 8 shows the results of the Pearson correlation analysis of the ESG rating scores
for the 195 sample firms (The Spearman correlation analysis results are similar and reported
in Appendix B). Pearson correlation analysis is commonly used to recognize the linear
correlation between two variables [17,18]. In general, the correlation coefficients between
the two ratings are extremely variable, ranging from 0.057 (FTSE and CASVI) to 0.736
(Bloomberg and SynTao), with an average of 0.411. Since the results released by SSII and
CASVI are grade ratings, they also differ from the other ratings. When they are excluded,
the correlation coefficient between pairwise ratings ranges from 0.550 (RKS and SynTao) to
0.736 (Bloomberg and SynTao), with a mean of 0.622; however, approximately half of the
ratings still do not exceed 0.6. Based on each rating, Bloomberg has the highest correlation
with other ratings, with an average correlation coefficient of 0.540 (0.658 when SSII and
CASVI are not considered); the other results (FTSE, MSCI, SynTao, RKS) are also similar,
with mean correlation coefficients ranging from approximately 0.4 to 0.5 (approximately 0.6
when SSII and CASVI are not considered). Due to the use of ratings, SSII and CASVI have
lower correlation coefficients with other ratings, with mean coefficients of 0.251 and 0.223,
respectively; however, the correlation between the two is only 0.427. The above results and
the previous ranking overlap analysis also support our concerns. Due to differences in the
rating systems and methodologies, the correlations of individual ratings are not strong,
and the correlations between pairwise ratings are mostly below 0.7. Even after excluding
SSII and CASVI, which use the grade ranking approach, the average correlation coefficient
Sustainability 2023, 15, 12573 10 of 17

for the other five ratings is only approximately 0.6, indicating a divergence between these
rating results.

Table 8. Pearson correlations between ESG ratings.

Bloomberg FTSE MSCI SynTao RKS SSII CASVI

Bloomberg 1
FTSE 0.591 *** 1
MSCI 0.682 *** 0.566 *** 1
SynTao 0.736 *** 0.607 *** 0.587 *** 1
RKS 0.621 *** 0.686 *** 0.597 *** 0.550 *** 1
SSII 0.310 *** 0.114 0.223 *** 0.274 *** 0.155 ** 1
CASVI 0.300 *** 0.057 0.261 *** 0.171 ** 0.121 * 0.427 *** 1
Mean of 0.540 0.437 0.486 0.488 0.455
0.251 0.223
coefficients (0.658) (0.613) (0.608) (0.620) (0.614)
Note: * p < 0.1, ** p < 0.05, *** p < 0.01; the values in parentheses are the coefficient means without considering SSII
and CASVI.

4. Discussion
The evidence in this paper indicates that ESG ratings for Chinese firms show high
divergence (low convergence). In this regard, we suggest the following:
Firstly, rating agencies should provide as many additional details of the rating pro-
cess as possible [19,20], such as more details about the underlying metrics and scoring
processes, to make comparing and understanding rating information more convenient for
information users.
Secondly, information users should use and understand ESG rating information from
a more comprehensive perspective [21]. For example, in academic research, more rat-
ings should be used in empirical analyses to improve the reliability and robustness of
the conclusions.
Thirdly, market regulators should also promote the development of a sustainable
corporate reporting system. The current Chinese reporting system does not force firms to
report general hard information (e.g., carbon emissions), and allows them to use vague
information for whitewashing purposes, which is one reason for the low convergence. In
addition, market regulators should strengthen their regulation of the rating agencies [22].
Finally, we encourage third-party agencies other than these rating agencies to conduct
comparative analyses and re-evaluations of these ratings to improve the efficiency of the
market’s use of multifaceted sustainability rating information.

5. Conclusions
As the world’s largest developing market, China’s sustainability transformation has
led to a dramatic increase in the demand for corporate sustainability information and, as a
result, the rapid growth of ESG rating businesses. This variety brings substantial references
to the market, but may also create confusion for information users. Do the different ESG
rating results converge? How great is this convergence (divergence)? To address the above
issues, we selected seven ESG ratings from the international ratings firms Bloomberg, MSCI,
and FTSE, and from the domestic ratings firms SynTao, RKS, SSII, and CASVI to carry out
the analyses. First, we compared the differences between the rating systems, and then
used the Hushen 300 index firms in 2019 as samples to carry out ranking overlap and
rating correlation analysis. The analysis results showed the following: (1) Among the 195
sample firms covered by all seven ratings, the overlap degree of the top 100 rankings of
each rating is low. For example, only approximately one third of the firms (35 firms) are
recognized in the top 100 of all seven ratings. (2) The correlation among the ratings is also
low, the correlation between two ratings is mostly below 0.7, and the average correlation is
only 0.411. The above results show that due to the individually designed rating systems
and the lack of mutual communication in the rating process, the results of different ESG
ratings for Chinese firms show a high degree of divergence (low convergence).
Sustainability 2023, 15, 12573 11 of 17

Future research could include the following. Firstly, the SRI market has developed
further given the current policy situation of the Chinese government (e.g., “double carbon
policy”), and the ESG ratings business in China has continued to grow. For example, SSII
has begun to update its ESG rating system, international agencies such as Bloomberg have
continued to increase their coverage of Chinese firms, and large domestic securities firms
such as the China Securities Index (CSI) have begun to launch ESG rating services. This
paper encourages researchers to track the convergence (divergence) of ESG ratings based
on China’s post pandemic period (after 2022). Secondly, further research is needed to
explore the factors that affect the ESG rating convergence (divergence) of Chinese firms and
whether divergent rating results affect market activities (e.g., influence analysts’ reports).

Author Contributions: M.Z.: conceptualization, design, manuscript preparation, and supervised

this project. Y.Z. and H.Y.: data preparation and design, formal analysis, original draft preparation,
and manuscript preparation sections. Each author contributed to the conceptualization and writing
of this paper. All authors have read and agreed to the published version of the manuscript.
Funding: This research is funded by the National Natural Science Foundation of China (Grant
number 71902090).
Institutional Review Board Statement: Not applicable.
Informed Consent Statement: Not applicable.
Data Availability Statement: Not applicable.
Conflicts of Interest: The authors declare no conflict of interest.

Appendix A
Based on the main databases of accounting and business and management publications
(e.g., Google Scholar and Web of Sciences), we selected papers according to the following
criteria: (1) the title, abstract and keywords of the paper contain the following terms:
“Environmental, Social and Governance” (or “ESG”) and “China”; (2) the paper preferably
be a publication on a journal with important influence, e.g., journals included in ABS
2021 or in JCR top 50%; (3) the time span selected is from 2019 to 2023; (4) it must be an
empirical paper, and the research object is Chinese A-share firms or related to the Chinese
A-share market; (5) at least one of the ESG ratings (proxy ESG/sustainable performance or
disclosure) of Bloomberg, FTSE, MSCI, SynTao, RKS, SSII, and CASVI are used for the main
regression or robustness test in the study. After the final screening, we obtained 41 studies,
and the content of these studies is summarized in Table A1. For example, we searched
“ESG and China” on Google Scholar with the time limit of 2019–2023, and filtered out a
paper “ESG and Firm’s Default Risk ” published in “Finance Research Letters”; next, by
reading the research design part of the literature, we confirmed that it took Chinese listed
firms as research samples, and used one of the seven ratings for empirical analysis (the
sample of this literature was Chinese listed firms from 2015 to 2020, and the SSII ESG rating
was used in the empirical test); therefore, we marked and summarized this paper.

Table A1. Overview of historical studies using ESG ratings.

Sampling
Study Independent Variable Dependent Variable ESG Measure Obs
Period
Chang, Cheng, Wang,
Corporate financing
Liu, and Hu (2023) ESG performance (+) SSII 2013–2019 2100
efficiency
[23]
SSII (main test),
Li et al. (2023) [24] ESG performance (+) Corporate innovation Hexun and Bloomberg 2009–2020 28,636
(robustness test)
Feng, Goodell, and
ESG ratings (-) Stock price crash risk SSII 2009–2020 24,193
Shen (2022) [25]
Sustainability 2023, 15, 12573 12 of 17

Table A1. Cont.

Sampling
Study Independent Variable Dependent Variable ESG Measure Obs
Period
Li, Zhang, and Zhao
ESG performance (-) Firms’ default risk SSII 2015–2020 185,125
(2022) [26]
SSII (main test) and
Deng, Li, and Ren Total factor
ESG performance (+) Bloomberg (robustness 2016–2020 11,544
(2023) [27] productivity (TFP)
test)
Hu, Zou, and Yin Stock price
ESG performance (+) SSII 2010–2021 24,544
(2023) [28] synchronicity
The cost of debt
Kong (2023) [29] ESG performance (-) SSII 2009–2021 16,833
financing
Luo, Wei, and He The access to trade SSII (main test) and
ESG performance (+) 2011–2019 14,201
(2023) [30] credit Hexun (robustness test)
Lian, Ye, Zhang, and
ESG performance (-) Bond credit spreads SSII 2009–2020 12,153
Zhang (2023) [31]
Chen, Li, Zeng, and SSII (main test) and 15,633
The cost of equity
Zhu (2023) ESG performance (+) Bloomberg (robustness 2010–2020 (main test)
capital
[32] test) 7585 (robustness test)
SSII (main test) 11,259
Li, Lian, and Xu Peer firms’ green
ESG performance (+) Bloomberg (robustness 2012–2020 (main test)
(2023) [33] innovation
test) 5964 (robustness test)
Zeng and Jiang (2023) Corporate
ESG performance (+) SSII 2009–2021 1247
[34] performances
32,534
SSII (main test) and
Tian and Tian (2022) Corporate trade credit (main test)
ESG performance (+) Bloomberg (robustness 2009–2020
[15] financing 10,188 (robustness
test)
test)
Zhou, Liu and Luo Market value of the
ESG performance (+) SynTao 2014–2019 1002
(2022) [35] firm
Broadstock, Chan,
Financial risk during
Cheng, and Wang ESG performance (+) SynTao 2015–2020 300
financial crisis
(2021) [36]
Wang, Ma, Dong, and Corporate green SynTao (main test) and
ESG rating (+) 2013–2019 18,790
Zhang (2023) [37] innovation CASVI (robustness test)
5864
Deng and Cheng Stock market SynTao (main test) and
ESG indices (+) 2013–2019 (main test)
(2019) [38] performance CASVI (robustness test)
3763 (robustness test)
Yang, Du, Zhang,
Corporate bond credit
Tong, and Zhou ESG disclosure (+) SynTao 2015–2020 2103
spreads
(2021) [39]
Xu, Liu and Shang
ESG performance (+) Green invention SynTao 2015–2018 739
(2020) [40]
He, Du, and Yu (2022) Hexun (main test) and 23,741 (main test)
ESG performance (-) Manager misconduct 2010–2020
[41] RKS (robustness test) 6030 (robustness test)
Yu, Liu, Cheng, and
ESG scores (no link) Stock returns RKS 2020–2021 300
Lee (2022) [42]
Jun, Shiyong, and Yi ESG disclosure
Intangible capital WIND and FTSE 2017–2020 4593
(2022) [43] (non-linear)
13,919 (Only the
Li, Yin, and Liu (2022) Bloomberg, FTSE, MSCI,
ESG rating (-) Stock price crash risk 2016–2020 CASVI sample is
[5] SSII, STGE, and CASVI
11,765)
Zhang, Zhao, and He ESG performance
Portfolio excess returns Bloomberg 2005–2018 10,808
(2022) [44] (non-linear)
Chen and Xie (2022) Corporate financial
ESG disclosure (+) Bloomberg 2011–2020 11,382
[45] performance
Bloomberg (main test) 7123
Yuan, Li, Xu, and Corporate financial
ESG disclosure (-) and 2010–2020 (main test)
Shang (2022) [46] irregularity risks
RKS (robustness test) 4490 (robustness test)
Chen, Khurram, Gao,
Technological
Abedin, and Lucey ESG disclosure (+) Bloomberg 2011–2019 7146
innovation capability
(2023) [47]
Ge, Xiao, Li, and Dai High-quality
ESG performance (+) Bloomberg 2011–2019 4985
(2022) [48] development of firms
Liu, Zhu, Yang, and Corporate financial
ESG configuration Bloomberg 2016–2020 210
Chu (2022) [49] performance
Zhou and Zhou The stock price
ESG performance (-) MSCI 2019–2020 1021
(2022) [50] volatility of firms
ESG proportion (+) and
Cheng, Lee, Li, and pillar mix efficiency
Financial performance MSCI 2015–2019 1108
Tsang (2023) [51] heterogeneity
(non-linear)
Sustainability 2023, 15, 12573 13 of 17

Table A1. Cont.

Sampling
Study Independent Variable Dependent Variable ESG Measure Obs
Period
Baker, Boulton,
ESG government Firm-level IPO
Braga-Alves, and MSCI 2008–2018 7446
ratings (-) underpricing
Morey (2021) [52]
Mu, Liu, Tao, and Ye
Digital finance (+) ESG performance SSII 2011–2020 26,294
(2023) [53]
23,607
Wang, Lin, Fu, and Institutional ownership SSII (main test) and (main test)
ESG performance 2012–2021
Chen (2023) [54] heterogeneity (+) Refinitiv (robustness test) 1124
(robustness test)
Wang, Peng, Tang, The development of SSII (main test) and
ESG performance 2010–2020 10,241
and Wu (2022) [55] fintech (+) CASVI (robustness test)
Institutional Bloomberg (main test)
Liu, Xiong, Gao, and
shareholdings ESG performance and 2010–2020 8421
Zhang (2022) [56]
Heterogeneity (+) MSCI (robustness test)
Meng and Zhu (2023)
Female executives (+) ESG performance Bloomberg 2011–2020 10,123
[57]
2276
Bloomberg (main test),
Fang, Nie, and Shen Enterprise digitization (main test)
ESG performance SSII and Hexun 2012–2020
(2023) [58] (+) 2753 and 2036
(robustness test)
(robustness test)
The network centrality Bloomberg (main test) 7562
Yang, Guo, and Fan
of institutional ESG performance and 2009–2020 (main test)
(2023) [59]
investors (+) SynTao (robustness test) 2876 (robustness test)
Wang, Sun, Wang, Bloomberg (main test)
Environmental
Hua, and Wu (2023) ESG performance and 2011–2020 5570
uncertainty (-)
[60] SSII (robustness test)
Bloomberg (main test) 7223
Ren, Zeng, and Zhao
Digital finance (+) ESG performance and 2011–2020 (main test)
(2023) [61]
SSII (robustness test) 6798 (robustness test)

Appendix B
In this section, we investigated the differences in regression analyses using different
ratings. We regressed each rating using five variables mostly used in the relevant historical
literature: (1) firm size (SIZE), measured as the natural log of total assets; (2) firm age
(AGE), measured as the natural log of the number of years since the firm was listed;
(3) financial leverage (LEV), measured as the liabilities/assets; (4) financial performance
(ROE), measured as the return on equity; (5) shareholder structure (Balance), measured as
the sum of the shareholdings proportion of the second- to the tenth-largest shareholder/the
shareholding proportion of the largest shareholder. We designed Model (A1) as follows:

ESG Ratingi =α0 + αi SIZEi +α2 AGEi +α3 LEVi +α4 ROEi +α5 Balancei +ε i (A1)

We used 195 firms that are jointly covered by all seven agencies as our regression
sample (consistent with Section 3). Due to different financial reporting rules, financial firms
were excluded, and the observations dropped to 157. To eliminate the effect of outliers, we
winsorized all continuous variables at the 1st and 99th percentiles.
The regression results are presented in Table A2. In columns (1) to (7), the dependent
variables are 0–1 standardized ESG scores from Bloomberg, FTSE, MSCI, SynTao, RKS,
SSII, and CASVI, respectively. Firstly, except for SynTao, SIZE has a positive effect on ESG
scores from all the other ratings (p < 0.05), and the significant coefficient ranges from 0.036
to 0.083. This result indicates that larger firms have better ESG ratings. Except for SSII and
CASVI (They are grade ratings), the regression coefficients of the AGE are significantly
negative (p < 0.10), and the significant coefficient ranges from −0.068 to −0.092. This
suggests that firms that are listed later have better ESG ratings. The regression coeffi-
cient of LEV is negative and significant only in the regression using CASVI (α = −0.204,
p < 0.05); the rest are not significant. The coefficients on ROE vary considerably across rat-
ings, and are only significant in regressions using Bloomberg, FTSE, and SynTao (α = −0.370,
Sustainability 2023, 15, 12573 14 of 17

p < 0.10; α = −0.476, p < 0.05; α = –0.414, p < 0.05). There is also a large difference in the
coefficients of Balance, which are only significant when using Bloomberg, FTSE, MSCI, and
RKS (α = 3.563, p < 0.10; α = 4.825, p < 0.05; α = 3.687, p < 0.10; α = 2.947, p < 0.10). The above
results show large variations in the regression results using different ratings, which indicates
that there is a high divergence (low convergence) among these ratings. This is consistent with
our previous analysis conclusions. Comparatively, the regression results of Bloomberg and
FTSE have the highest consistency, and the regression coefficients of the two are basically
consistent in the five variables. The results of MSCI are also consistent with the two, except
for the ROE. In general, the results of the three international ratings in this regression analysis
are higher than those of the domestic ratings. Among the domestic ratings, the results of
RKS have the highest consistency with those of the three international ratings, and all of the
coefficients are similar to those of the analysis of the international ratings, except for the ROE.
However, SSII and CASVI ratings have the lowest consistency, and they use the grade rating
system. They differ in the coefficients of all variables except for SIZE.

Table A2. Comparative regression analysis.

(1) (2) (3) (4) (5) (6) (7)

Bloomberg FTSE MSCI SynTao RKS SSII CASVI
SIZE 0.075 *** 0.036 ** 0.081 *** 0.015 0.066 *** 0.054 *** 0.083 ***
(4.873) (2.585) (5.442) (0.995) (5.596) (3.184) (6.958)
AGE −0.090 ** −0.089 *** −0.086 ** −0.068 * −0.092 *** 0.019 −0.004
(−2.459) (−2.671) (−2.406) (−1.898) (−3.274) (0.470) (−0.150)
LEV −0.145 0.038 −0.158 −0.117 −0.121 −0.194 −0.204 **
(−1.320) (0.387) (−1.489) (−1.098) (−1.443) (−1.607) (−2.411)
ROE −0.370 * −0.476 ** −0.053 −0.414 ** −0.053 −0.173 0.032
(−1.795) (−2.546) (−0.265) (−2.075) (−0.334) (−0.759) (0.203)
Balance 3.563 * 4.825 ** 3.687 * 2.192 2.947 * 1.614 2.169
(1.720) (2.564) (1.841) (1.091) (1.856) (0.706) (1.355)
_cons −1.167 *** −0.275 −1.321 *** 0.283 −1.074 *** −0.681 −1.334 ***
(−3.127) (−0.812) (−3.661) (0.783) (−3.753) (−1.651) (−4.624)
N 157 157 157 157 157 157 157
r2 0.222 0.197 0.224 0.063 0.252 0.078 0.271
Note: Bolded numbers are significant coefficients; t statistics are reported in parentheses; * p < 0.1, ** p < 0.05,
*** p < 0.01.

Appendix C
Table A3 shows the results of the Spearman correlation analysis of the ESG rating
scores. In general, the correlation coefficients between the two ratings range from 0.116
(FTSE and SSII) to 0.719 (Bloomberg and SynTao), with an average of 0.450. Based on each
rating, Bloomberg has the highest correlation with other ratings, with an average correlation
coefficient of 0.570; the other results (MSCI, RKS, SynTao, FTSE) are also similar, with mean
correlation coefficients of around 0.5; SSII and CASVI remain lower correlation coefficients
with other ratings, with mean coefficients of 0.248 and 0.348, respectively. Apparently, the
Spearman correlation analysis presents consistent results with Section 3.5.

Table A3. Spearman correlation coefficients between ESG ratings.

Bloomberg FTSE MSCI SynTao RKS SSII CASVI

Bloomberg 1
FTSE 0.608 *** 1
MSCI 0.670 *** 0.582 *** 1
SynTao 0.719 *** 0.607 *** 0.571 *** 1
RKS 0.685 *** 0.670 *** 0.629 *** 0.573 *** 1
SSII 0.295 *** 0.116 0.227 *** 0.257 *** 0.154 ** 1
CASVI 0.441 *** 0.203 *** 0.397 *** 0.275 *** 0.331 *** 0.438 *** 1
Mean of coefficients 0.570 0.464 0.513 0.500 0.507 0.248 0.348
Note: ** p < 0.05, *** p < 0.01.
Sustainability 2023, 15, 12573 15 of 17

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