The ESG data vendor market generates over billion in annual revenue. Yet research consistently shows that the major providers disagree with each other far more than their authoritative pricing suggests. The correlation between MSCI and Sustainalytics ESG scores is around 0.5 — comparable to chance in some analyses. Understanding why requires understanding what these vendors actually measure.
How the Major ESG Data Vendors Work
MSCI ESG Ratings
MSCI rates over 8,500 companies on a AAA to CCC scale, assessing exposure to industry-specific ESG risks and management of those risks. The methodology weights governance factors heavily and adjusts for industry context. Ratings update annually with the ability to trigger interim reviews for significant events.
Sustainalytics (Morningstar)
Sustainalytics uses an ESG Risk Rating measuring the degree to which a company's enterprise value is at risk from ESG factors. It separates managed risk from unmanaged risk, and covers over 14,000 companies with quarterly updates for most entities.
S&P Global ESG Scores
S&P Global uses the Corporate Sustainability Assessment, an annual questionnaire covering 130+ questions. Companies that complete the questionnaire receive a score; those that do not are assessed using public data. The voluntary participation model creates selection bias — companies confident in their ESG performance are more likely to participate.
LSEG (formerly Refinitiv)
LSEG ESG scores cover over 10,000 companies across 630 ESG measures. The methodology is transparent and underlying data is available, making it popular for analysts building custom ESG screens. Scores update when new data becomes available rather than on a fixed cycle.
Why ESG Vendors Disagree
Berg, Koelbel, and Rigobon at MIT Sloan decomposed the divergence between major ESG rating providers and found three primary sources: scope differences (what they measure), measurement differences (how they measure the same thing), and weight differences (how they combine metrics). For investors, a company rated highly by one provider and poorly by another is not necessarily an anomaly — it may reflect a genuine difference in which ESG dimensions each provider prioritises.
The Shared Limitation: Disclosure-Based Assessment
Despite methodological differences, the major providers share a structural characteristic: they all rely primarily on company-disclosed data. This creates a systematic bias. Companies that invest in disclosure quality score higher regardless of whether their operations have changed. Companies facing active regulatory enforcement for environmental violations can simultaneously hold top-tier ESG ratings if their disclosure practices are strong.
A Newer Category: Evidence-Based ESG Data
A smaller category of ESG data providers anchors assessment to third-party verifiable evidence rather than company disclosures. Instead of asking what a company reports, this approach asks what independent records — regulatory databases, court filings, customs records, investigative journalism — show about actual behaviour. The advantage is independence from the disclosure game. A company cannot optimise its regulatory enforcement record the way it can optimise a sustainability report.
How to Select an ESG Data Vendor
The right choice depends on use case. For broad portfolio screening, MSCI or Sustainalytics offer the widest coverage. For custom factor construction, LSEG's granular data supports building proprietary screens. For controversy and event monitoring, purpose-built tools provide better real-time signal than annual ratings. For claims verification, evidence-based providers can cross-reference stated commitments against third-party records — a capability disclosure-based ratings do not offer.
Many sophisticated ESG investors use multiple providers: a broad rating for initial screening, a controversy monitoring service for ongoing risk management, and a claims verification layer for deep due diligence on material holdings.
See how Novare approaches ESG claims verification, or learn about our real-time controversy monitoring methodology.