ESG Score vs ESG Rating: What’s the Difference?

As more businesses and investors focus on sustainability, ESG (Environmental, Social, and Governance) metrics have become important tools. Two common terms you’ll often see are ESG scores and ESG ratings. Though they sound similar, they are different in how they’re calculated and used. Understanding both can help you make better decisions when it comes to investing or evaluating companies.

What Is ESG?

ESG measures how a firm performs in three key areas:

Environmental: This includes carbon emissions, energy use, and waste management.
Social: Covers labor practices, diversity, and community impact.
Governance: Involves board structure, ethics, and transparency.

A company that scores well in these areas is seen as more responsible, ethical, and often more sustainable in the long term.

ESG Scores Explained

What is an ESG Score?

An ESG score is a number—often from 0 to 100—that shows how well a company performs on ESG issues.

How Is It Calculated?

Data Collection: Analysts gather information from public reports, company disclosures, and third-party data.
Weighting: Different ESG issues are weighted based on how important they are in that company’s industry.
Scoring Models: Providers use their own systems to calculate a final score.

For example, if a company is in the energy sector, its environmental impact might be weighted more heavily.

Who Provides ESG Scores?

Some of the top ESG score providers are:

Sustainalytics (Morningstar): Focuses on ESG risk exposure.
S&P Global: Offers detailed ESG breakdowns.
Refinitiv: Provides in-depth ESG data across industries.

Why It Matters?

ESG scores are useful for investors who want to analyze a company’s performance in specific ESG areas. They are especially helpful for detailed research or when building an ESG-focused portfolio.

ESG Ratings Explained

What is an ESG Rating?

ESG ratings use letter grades—ranging from AAA (highest) to CCC (lowest)—to provide a quick, overall view of a company’s ESG performance.

How Is It Determined?

Frameworks: Ratings are based on industry-specific standards.
Peer Comparison: Companies are evaluated based on how they perform compared to others in the same industry.
Combined Scores: Individual ESG scores are merged into a final letter rating.

For example, MSCI might give a company a BBB rating based on how well it handles ESG risks compared to its competitors.

Who Provides ESG Ratings?

Top ESG rating providers include:

MSCI
ISS ESG
Sustainalytics

Why It Matters?

Ratings are ideal for investors or consumers who want a quick, easy-to-understand snapshot of a company’s ESG position. They help with fast comparisons and decision-making.

ESG Score vs ESG Rating: Key Differences

Feature	ESG Score	ESG Rating
Format	Numeric (e.g., 0–100)	Letter-grade (e.g., AAA to CCC)
Detail Level	Highly detailed and specific	Broad, high-level summary
Use Case	In-depth analysis and comparisons	Quick snapshot for fast evaluation
Basis	Based on a company’s absolute performance	Based on performance relative to industry peers
Key Providers	S&P Global, Refinitiv, Sustainalytics	MSCI, ISS ESG, Sustainalytics

Why ESG Metrics Matter

Investors use them to identify low-risk, sustainable investments.
Companies use them to improve practices and show responsibility.
Customer use them to identify and support brands that reflect their personal values.

Example: Tesla

Tesla may get a high ESG rating for its clean energy mission but might score lower in specific areas like labor practices or supply chain issues. This is why looking at both the score and rating provides a fuller picture.

How to Use ESG Scores and Ratings

For Businesses:

Identify weak spots with ESG scores and improve them.
Share ratings to gain trust with investors and consumers.

For Investors:

Use both metrics—scores for detail, ratings for speed.
Compare across providers for accuracy.

For Consumers:

Learn how metrics are calculated.
Combine ESG insights with other factors like financial health or brand ethics.

Final Thoughts

ESG scores and ratings help you understand how a company is doing in terms of sustainability and social responsibility. Scores give you depth, while ratings offer a quick overview. Used together, they can guide smarter, more ethical decisions—whether you’re investing, running a company, or choosing which brands to support.