ESG Ratings Divergence What to do when MSCI ≠ Sustainalytics ≠ CSA.

One of the most persistent frustrations for both investors and issuers is the divergence of ESG ratings across providers. A company might score as a leader in MSCI’s framework, appear high-risk in Sustainalytics’ risk ratings, and fall somewhere in the middle in S&P’s Corporate Sustainability Assessment (CSA). This inconsistency stems from fundamental differences in methodology, scope, and weighting. For example, MSCI emphasizes relative performance within an industry and exposure to financially material ESG risks, while Sustainalytics often focuses on unmanaged risk exposure and controversy assessments. Meanwhile, the CSA places more weight on self-reported data, governance structures, and disclosure quality. The result is that the same company can be perceived as either a sustainability frontrunner or a laggard depending on which lens is applied.

For investors, this divergence creates a challenge in decision-making. Relying too heavily on a single rating can distort portfolio allocation or engagement strategies. A growing best practice is to adopt a multi-provider approach, triangulating insights from different methodologies to build a more balanced view. Some asset managers go further by creating internal ESG scoring models, blending external ratings with proprietary research, sector expertise, and forward-looking assessments. This helps reduce overreliance on third-party ratings while accounting for nuances that external providers may miss—such as local context, regulatory risks, or company-specific transition plans.

For issuers, ratings divergence can be equally problematic. A strong score with one agency might not offset a weak score with another, especially if investors use different providers. Companies often find themselves engaging in a ratings management process, where they respond to questionnaires, correct data inaccuracies, and provide additional disclosures to reduce misalignment. While this can be resource-intensive, it underscores the importance of high-quality, consistent sustainability reporting that aligns with global standards like ISSB, GRI, or CSRD. The more transparent and verifiable the data, the less room there is for ratings agencies to rely on estimates or assumptions that can create divergence.

Ultimately, ESG ratings divergence is not going away—because the agencies are not measuring exactly the same thing. The key is to treat ratings as inputs, not verdicts. For investors, this means using them as starting points for analysis and engagement, rather than as standalone truth. For issuers, it means focusing on strengthening data quality and narrative consistency, while understanding the criteria and weightings of each provider. The way forward is not to expect convergence, but to build resilience to divergence by embedding sustainability into strategy and ensuring that, no matter the framework, the fundamentals point in the same direction.