Better Measurement Guides Better Investments
MassPRIM believes it is essential to have consistent, reliable data and measurement to make the best possible investment assessment. Yet, the continued lack of investment grade disclosure combined with inconsistent ESG ratings has led to an erratic view of how factors affect enterprise financial performance.
Driven by a desire for more standardization, and less ambiguity around measurement of ESG by rating agencies, MassPRIM became the founding member of the Aggregate Confusion Project (ACP) at Massachusetts Institute of Technology (MIT)’s Sloan Sustainability Initiative in 2020. This work aims to reduce and eliminate the acute challenges for investors trying to achieve financial and social returns and improve the quality of ESG measurement and decision making in the financial sector. The ACP bridges academic theory and real-world insights to create more consistent, reliable, and relatable signals for investment managers. Through our support of the ACP, we are striving to establish consistency and reliability of ESG reporting for investors reviewing these considerations in their investments.
The project to date has focused on the divergence between ratings and improving overall data sets, broadly seeking to:
- Reduce the level of “noise” in measuring specific ESG categories like labor treatment, carbon emissions and product safety;
- Understand the effect of ESG-driven investment flows on stock price and firm behavior;
- Develop smarter ways to aggregate ESG factors into composite indices;
- Reliably assess investor preferences to enable ESG indices to be more customized and attuned to investor values.
The Aggregate Confusion Project was recognized in 2022 by Institutional Investor as the “Partnership of the Year” for its goal to improve data for managers and allocators.
