Rating ESG

This chapter explores ESG score as essential tools for assessing corporate sustainability performance and guiding investment decisions. It examines the rise of ESG rating agencies, which translate environmental, social, and governance performance into measurable indicators for investors. While ESG score reduces information asymmetry and integrates sustainability risks into financial decision-making, their methodologies are heterogeneous and sometimes opaque, producing divergent assessments and market uncertainty. The chapter highlights regulatory responses, particularly Regulation (EU) 2024/3005, which establishes a harmonized framework requiring methodological transparency, independence, and oversight by ESMA to enhance credibility and investor confidence. Finally, the chapter examines the impact of ESG score on corporate performance, showing that higher ratings can lower cost of capital, reduce exposure to systematic risk, improve valuations, and enhance resilience, while acknowledging ongoing methodological limitations and the potential for misaligned or opportunistic practices.