ESG Ratings Under Scrutiny: A Literature Review on Divergence, Methodology, and Market Implications

Environmental, Social, and Governance (ESG) ratings have become a cornerstone of sustainable finance, shaping investment strategies, corporate conduct, and policy development. However, despite their growing prominence, ESG scores frequently diverge across rating agencies, creating uncertainty and diminishing confidence in sustainability metrics. This thesis presents a comprehensive literature review of the academic scholarship on ESG rating disagreement and its implications for corporate behaviour, financial performance, and global regulatory frameworks. Drawing upon an extensive body of peer-reviewed studies, the review identifies methodological divergence, stemming from variations in indicator selection, weighting schemes, and disclosure quality, as the principal source of inconsistency in ESG evaluations.