If ESG ratings are free, does that mean they’re crappy?

– Free ESG rating scores might mean they are valued at zero.
– The psychology is that people value something based on how much they pay for it.

Recently, I saw someone post this on social media, “Is the reason ESG scores are now available free that they often don’t reveal much useful info about key ESG issues, or much that is investment-relevant?”

This was in response to the latest ESG rater to announce that their ratings would now be available for free. There indeed is a trend for some raters to give away their scores for free.

It’s a valid question. But I come at it from a different perspective. It could very well wind up being that some – or even all – of the free ESG ratings have value, but that no one gives them any value because they are free. In other words, many people perceive the value of something according to what they paid for something – not what it’s intrinsic value actually is.

Case in point. When I was part of an association’s leadership, we decided to try hosting events that were free instead of charging the nominal rate we had been charging. Attendance fell dramatically for these free events. People gave them no value.

Another validation of my theory for me is that I recently gave away a “proxy season conference” on my ZippyPoint.com platform for free. The panels contained all the luminaries – and 50% more panels – that I’ve always used for a similar conference I used to host in my prior job. Not a whole lot of people bothered to watch the panels. It’s crazy, I know. People would much rather pay for content than get it for free. Or rather, they just assume that because something is free, it must be crappy…