Investor perceptions regarding the quality of data provided by major ESG rating agencies have declined significantly, according to the latest Rate the Raters study published by global sustainability consultancy ERM.
The research—which reflects feedback from institutional investors managing an estimated $23.5 trillion in assets under management—found that 12 of the 13 rating providers evaluated suffered drops in perceived quality scores compared to the previous assessment in 2023. The highest-rated provider’s score fell from 4.2 to 3.5 on a five-point scale.
Despite growing criticism of data inconsistencies and gaps, over 50 per cent of surveyed investors confirmed that ESG ratings remain a vital component of investment decision-making, citing their relevance to core financial performance, risk management, and portfolio construction.
Key findings from the ERM Sustainability Institute report include:
- Rising fiduciary standards: Institutional investors are subjecting third-party ESG metrics to greater scrutiny as sustainability factors become further integrated into mainstream investment strategies.
- Proprietary risk supplementation: Asset managers are increasingly supplementing third-party ratings with direct corporate engagement and internal research models to offset data errors and methodological disparities.
- Rating agency divergence: MSCI was the sole provider to achieve an increase in its quality score since 2023, rising from seventh to first place in overall utility, familiarity, and perceived quality. Survey respondents highlighted MSCI’s rapid deployment of specialized datasets covering climate risk, human rights, and biodiversity.
Aiste Brackley, Director of the ERM Sustainability Institute, stated that investor tolerance for errors and gaps in ESG datasets is shrinking as sustainability metrics become more tightly linked to fiduciary duties.
Brackley added that while third-party ratings continue to serve as essential baseline inputs, mainstream asset managers are demanding greater transparency and speed from market data providers.
