How ESG Scores Work
ESG scores from major providers can disagree by 50% or more on the same company. Understanding why helps you use them more effectively, or find better alternatives.
Last reviewed: March 2026
The Disagreement Problem
Academic research has consistently shown that correlations between major ESG rating providers range from 0.38 to 0.71, far below what you'd expect for ratings supposedly measuring the same thing. For comparison, credit rating agencies correlate at 0.99. (Berg, Koelbel & Rigobon, MIT Sloan, 2022)
This means the same company can be rated as an ESG leader by one provider and a laggard by another. The implications for investors and companies are significant.
Major ESG Rating Providers
Each provider has a different methodology, scale, and focus.
MSCI
Industry-relative scoring based on exposure to ESG risks and management of those risks
- • Wide coverage (8,500+ companies)
- • Long track record
- • Industry-relative benchmarking
- • Disclosure-heavy methodology
- • Annual updates lag events
- • Correlation between providers is low
Sustainalytics
Measures unmanaged ESG risk exposure after accounting for company management
- • Risk-focused framing
- • Controversy research integration
- • Clear risk categories
- • Still relies heavily on disclosures
- • Subjectivity in risk assessment
- • Update frequency
LSEG (formerly Refinitiv)
Quantitative scoring based on publicly available ESG data points
- • Highly transparent methodology
- • Large data point coverage
- • Regular updates
- • Mechanistic approach
- • Rewards disclosure volume
- • Less qualitative judgment
S&P Global
Annual Corporate Sustainability Assessment with company engagement
- • Deep company engagement
- • Detailed questionnaires
- • Sector-specific criteria
- • Self-reported data
- • Resource-intensive for companies
- • Update frequency
Why ESG Scores Disagree
The disagreement isn't a bug-it's a feature of how these systems are built.
Different definitions of ESG
There is no universal standard for what 'ESG' means. Providers weight environmental, social, and governance factors differently, and define sub-categories differently.
Different data sources
Some providers rely heavily on company disclosures, others incorporate third-party data. The same company can look very different depending on which data is used.
Different materiality frameworks
What's 'material' for a tech company differs from an oil company. Providers use different industry classifications and materiality maps.
Disclosure vs. performance
Some methodologies reward companies for having policies and making disclosures. Others try to measure actual outcomes. These can diverge significantly.
Timing and frequency
Scores updated annually can miss major events. A company with a recent scandal might still show a high score until the next update cycle.
The Evolution of ESG Assessment
ESG assessment is evolving from simple screens to sophisticated verification.
Exclusionary Screening
Simple negative screens: exclude tobacco, weapons, gambling. Binary decisions based on product involvement.
Disclosure-Based Scoring
Score companies on ESG policies, reporting, and commitments. More pages in sustainability report often means higher score.
Action-Based Verification
Compare commitments to evidence. Verify claims against third-party data. Monitor real-time signals that contradict stated positions.
What Does This Mean for You?
For Investors
- Don't rely on a single ESG score
- Understand each provider's methodology
- Look for verification, not just disclosure
- Consider action-based approaches like Walk-The-Talk Score
For Companies
- Focus on execution, not just reporting
- Be specific about commitments and timelines
- Prepare for third-party verification
- Monitor your own controversy signals
For Analysts
- Use multiple data sources
- Dig into methodology documentation
- Weight recent controversies appropriately
- Look for evidence of follow-through
Ready for Action-Based ESG?
Walk-The-Talk Score™ represents the next evolution in ESG assessment. We verify commitments against evidence, not just disclosures.