Why ESG Ratings Don’t Measure the Same Thing

Two investors can look at the same company—and come away with completely different conclusions about its sustainability performance.

Take Volkswagen. One rating system might classify it as a laggard, another as average, and a third as a leader. At first glance, that looks like inconsistency—or even a flaw in ESG ratings.

But the issue is not the company. It’s the lens.

ESG ratings are often treated as a single, comparable metric. In reality, they are better understood as different analytical models, each designed to answer a different question. That is why MSCI, Sustainalytics, and CDP can score the same company very differently—without any of them being wrong.

What ESG ratings are actually measuring

The easiest way to understand ESG ratings is to stop asking which one is correct and instead ask: what is each rating trying to measure?

• MSCI looks at how well a company manages financially material ESG risks and opportunities, relative to peers.
• Sustainalytics focuses on unmanaged ESG risk—how much risk remains after mitigation.
• CDP evaluates the quality and completeness of environmental disclosure.

These are not variations of the same score. They are fundamentally different perspectives.

Why the same company gets different scores

Once you look under the hood, ESG ratings are built through a series of choices: objective, scope, data used, measurement approach, and aggregation logic.

Small differences at each stage compound into large differences at the end. Research shows that the biggest drivers are scope and measurement—not weighting, as is often assumed.

A real-world pattern: disclosure vs risk

In many cases, companies with strong climate disclosure score well on CDP, but not necessarily on broader ESG ratings.

Volkswagen is a good example: strong climate disclosure can support a higher CDP score, while broader ESG risks and legacy governance issues can weigh on other ratings.

The same pattern appears in sectors like aviation and chemicals, where transparency may improve even while structural emissions exposure remains high.

Why better reporting won’t fully solve this

With CSRD coming into force, there is a growing expectation that standardized reporting will make ESG ratings more comparable. It will help—but only to a point.

Standardised disclosures improve data quality and consistency. But they do not change what rating providers prioritise or how they interpret the same data.

Why this matters for investors

The real risk is not disagreement between ESG ratings. The real risk is treating them as directly comparable, objective, and decision-ready.

That creates false precision. In practice, it can lead to portfolio bias, misinterpretation of sustainability performance, and over-reliance on a single score.

What this means in practice

• Match the rating to the objective. Use risk-based ratings for risk decisions and disclosure-based scores for transparency analysis.
• Use more than one perspective. Disagreement is a signal that needs to be understood.
• Look beyond the headline score. Underlying drivers matter more than the final number.
• Treat ESG ratings like models. They come with assumptions, limitations, and update risks.

Closing thought

ESG ratings do not disagree because one is flawed. They disagree because they are designed to measure different aspects of sustainability.

The question is no longer “Which rating is correct?” but “What does this rating actually tell me—and is that what I need to know?”