The ESG ratings industry has been around since before the advent of the modern sustainability movement. Their role in the ecosystem may seem straightforward. If investors are going to consider non-financial factors, then someone has to collect, curate, and evaluate that data. However, that is easier said than done, and ESG ratings agencies have struggled for years to refine their niche. ERM Sustainability Institute’s recent Rate the Raters 2026 shows that reliance on ESG scores is down, but investors are holding out hope that regulation can save the ratings industry:
“Top level ESG scores fell out of the top three most useful sources of ESG information for investment decisions. Investors prefer to use the underlying data, sub-scores, and company-level information behind ESG ratings as inputs to their own analysis and decision-making…
Investors’ top priorities for improvement reflect these growing regulatory demands: greater focus on material issues, better alignment with mandatory reporting standards, stronger regulation of ESG ratings, and more transparent, higher-quality methodologies.”
The survey notes that trust in ESG scores is at an all-time low as investors are relying more on company-published data. It appears that disclosure laws and voluntary frameworks are increasing investor confidence in company data. However, while CSRD, ISSB, and a trend towards assurance are driving standardization in disclosures, there is no law setting trends for ESG ratings regulation. Many jurisdictions have laws regulating the industry, but there is no agreed-upon rule set. Regulators seem to be refining their approaches, and no gold standard has emerged.
The survey also found that investors are far more likely to trust raters who disclose their methodologies. These data suggest that regulatory schemes should prioritize transparency and methodology disclosures as a cornerstone of regaining investor trust.
Our members can learn more about ESG ratings here.
