Recent news of Facebook’s deficient oversight of Cambridge Analytica’s unauthorised access to its user data has had an impact on multiple stakeholders, including users and investors. The controversy reinforces the mounting concern related to data privacy exposure from data-driven business models that also have monopolistic market share. Sustainalytics has noted these risks across multiple sectors and ESG issues.
We have downgraded this controversy rating to Category 4 because of Facebook’s ongoing involvement in violating the privacy rights of its users. The news surrounding Cambridge Analytica raises serious questions regarding Facebook’s management of its users’ data and whether it can balance its considerable privacy commitments and expectations with its commercial approach, which is key to its advertising-driven business model. Facebook’s failure to disclose knowledge of the unauthorised use of its data in a timely manner is a key consideration in our overall assessment of this controversy.
Our outlook for this rating is Neutral and we anticipate that as the issue evolves, we may reassess our rating over the next 12 months. We believe that regulatory scrutiny of Facebook’s data privacy management will persist. Facebook will remain under pressure from regulators, users and investors in the near term.
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