ESG Rating

An ESG rating captures a company's sustainability performance across the three dimensions environmental, social and governance. Specialised rating agencies such as MSCI, Sustainalytics, ISS ESG or S&P Global evaluate publicly available information, questionnaires and company disclosures and condense them into an assessment, for example a letter grade (e.g. AAA to CCC) or a risk score. The aim is to make a company's exposure to material sustainability risks and the quality of its risk management comparable.

Unlike the legally mandated sustainability reporting under the CSRD and ESRS, ESG ratings are a private-sector product with no uniform methodology. Agencies weight industries, topics and data points differently, which is why one and the same company can receive widely diverging results from different providers (so-called "rating divergence"). Investors, banks and business partners nevertheless use ratings extensively, for example for portfolio steering, in the context of disclosure obligations under the SFDR, or as part of supplier assessments and lending conditions.

At EU level the market is being regulated for the first time: the ESG Rating Regulation (EU) 2024/3005 subjects providers of ESG ratings to authorisation and supervision by ESMA from mid-2026 and requires transparency about methods, data sources and conflicts of interest. For reporting companies the practical consequence is that a robust, audited CSRD/ESRS data foundation increasingly forms the basis of external ratings. Those who collect, document and manage their data points cleanly improve not only the quality of their reporting but also their position in the relevant ESG ratings.