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Finding the ESG edge in global small-cap stocks – AllianceBernstein

ESG ratings are lacking for small-cap stocks globally preventing asset managers that rely on third-party ratings from building small-cap funds.

Posted on Oct 21, 2022

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... In small-cap markets, fundamental research is in short supply - and good environmental, social and governance (ESG) research is even scarcer. But diligent investors can still find ways to access robust ESG data and create active global small-cap portfolios of companies that are making meaningful contributions to address sustainability issues.

Globally, ESG ratings are lacking for small-cap stocks stopping asset managers from building small-cap funds, as they rely exclusively on third-party ratings. Since smaller companies often struggle to complete all the disclosures necessary to earn a rating, many remain unrated by leading ratings providers (MSCI and Sustainalytics) even if they disclose a range of valuable ESG information.

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