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If there’s one company that should be a slam dunk to rate based on environmental, social, and governance factors, it should be cigarette maker Philip Morris. But as it turns out, there’s a lot of disagreement among the major firms that provide ESG ratings.
“If you think about Philip Morris when it comes to ESG, obviously most people would think it’s very negative, and MSCI’s rating is negative,” said Michael Chen, director of portfolio management at Boston-based PanAgora Asset Management.
In actuality, it’s a bit more complicated, Chen added. “Remember ESG is made up of E, S and G,” he said. “From an E perspective, smoke is polluting, so that’s negative, and the S is negative because smoking causes lung cancer and harms people’s health. But Philip Morris has a pretty good governance structure, so Sustainalytics actually has them as neutral. It’s just different preferences at the end of the day.”