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ESG performance: what is the influence of ESG rating providers?

Just as credit rating agencies assess the creditworthiness of governments or companies, the providers of environmental, social and governance (ESG) ratings evaluate companies’ corporate social and environmental responsibility. However, the ESG ratings they publish appear to encompass more than just an assessment of CSR practices.

07/24/2026

4 min

ESG scores, which measure companies’ performance across environmental, social and governance dimensions, aim to reflect their corporate social and environmental responsibility (CSR) practices. Produced by specialist providers or agencies, they have become a key decision-making tool for investors and play an increasingly important role in firm valuation.

In a context where companies, either voluntarily or under pressure, are investing heavily in CSR, a critical question emerges on the role of ESG ratings: Could they influence the way investors incorporate CSR into company valuations? This is what a recent study we published in the British Journal of Management suggests. The results highlight the importance of the European Union’s (EU) efforts to strengthen the standardization, reliability and transparency of non-financial information, particularly through regulations governing the disclosure of ESG activities and ratings.

Indeed, if these ratings do reflect ESG performance but can also influence how investors value them, then rating agencies can help steer companies’ CSR priorities towards the objectives set by the EU (such as carbon neutrality by 2050 or the protection of biodiversity).

Unexpected variations

Can an ESG score change without the company altering its underlying practices? Surprisingly, the answer is yes.

In 2010, following a series of acquisitions of other data providers, MSCI, one of the major players in ESG ratings, changed its methodology by adopting sector-specific indicators. This change had an immediate, automatic effect: some companies saw their scores rise and others fall, even though their practices had not changed. For example, a company that had been rated with 20 strengths and 10 weaknesses had an overall ESG rating of 10 in 2009. If only 15 of its strengths were subsequently deemed relevant to its sector, its rating automatically fell to 5 in 2010. In total, nearly 80 per cent of the companies studied were affected by this change in methodology. And around 60 per cent of these firms saw their ESG score decline.

This quasi-experimental setting enabled us to isolate the effect of the rating methodology and to observe what happens when ESG scores vary independently of companies’ actual behavior. It therefore provides an ideal framework for analyzing the impact that rating providers can have through a simple change in the way they calculate ESG scores.

A confirmed influence

Do these ‘artificial’ changes influence the way companies are valued? In theory, no: if the markets correctly processed the information directly issued by companies, a purely technical change in the measurement of their ESG performance should not affect their valuation.

However, such an effect was observed in 2010. When MSCI’s ESG scores got modified following this change in methodology, the effect of these scores on company valuations became significantly stronger. This increased sensitivity appears to be particularly pronounced for companies subject to low capital constraints and held by a small proportion of institutional investors. Indeed, the valuation of these companies depends more heavily on external signals such as ESG scores, and therefore can be influenced by rating providers.

These results therefore suggest that ESG ratings are not merely indicators of ESG performance, but can also convey important information on their own, since companies whose scores were affected saw the link between their ESG score and their valuation strengthen. This can be explained by the fact that investors perceive ESG scores as simplified indicators of complex non-financial information, and by the fact that new methodologies can produce measures deemed to be more financially relevant.

Implications for everyone

For companies, understanding rating methodologies is therefore becoming a genuine strategic challenge. Beyond simply improving their CSR practices, they must also understand how their actions are assessed and how this can influence their market valuation.

As for rating providers, these findings suggest that they are not merely neutral observers or assessors of ESG performance. Their methodological choices do not just describe a reality, but can also shape that reality. By refining the way they calculate ESG scores, they can help increase the weight given to these scores in the valuation of rated companies and thereby guide the latter’s sustainability strategies.

Finally, for regulators, these findings open up significant opportunities. Whilst rating agencies play a central role in conveying and interpreting ESG information, they can also become potential conduits for public policy, provided that their methodologies are aligned with the environmental, social and governance objectives set by the authorities.

This is the English version of an article originally published by Professors Albane Tarnaud and Mohammed Zakriya in French on the Conversation France