Investors are increasingly turning to internal resources to gauge companies’ environmental, social, and governance (ESG) performance, signaling a profound shift in how the financial world approaches sustainability data. According to a comprehensive new survey released by sustainability consulting firm ERM, in-house research and direct engagement with companies have officially overtaken traditional ESG ratings as the top sources of information on corporate ESG performance.
This evolution in methodology comes as perceived quality and trust in independent ESG ratings providers have declined over the past few years. Financial institutions and institutional investors are demanding higher precision, greater accountability, and deeper materiality from the data guiding their multi-trillion-dollar portfolios. Yet, even as scrutiny of these third-party raters reaches new heights, the data reveals a nuanced reality. Over half of investors continue to view ESG ratings data as fundamentally material to investment performance, and a vast majority still rely on these products and services on at least a weekly basis.
The Shifting Landscape of the "Rate the Raters" Report
The findings form the core of ERM’s newly published report, titled “Rate the Raters 2026.” To capture the pulse of the global financial sector, ERM surveyed 53 investment industry professionals. These respondents represent firms managing an estimated $23.5 trillion in assets under management, with participants spanning major financial hubs across North America, Europe, the Middle East, Africa (EMEA), Asia Pacific, and Latin America. This latest iteration serves as a direct follow-up to ERM’s previous investor ESG ratings survey conducted in 2023, offering a clear comparative lens on how institutional perspectives have transformed over a turbulent multi-year period.
The survey uncovered a significant decline in investor sentiment regarding the accuracy of third-party evaluations. When asked to rank their trust in ESG ratings to accurately judge a company’s true sustainability performance, respondents gave an average score of just 3.05 out of five. This represents a noticeable downward slide from the 3.31 average recorded in the 2023 survey. This drop reflects growing industry frustration over methodology discrepancies, opaque scoring models, and a historical lack of standardization across different ratings agencies.
Winners and Losers Among Individual Ratings Providers
Despite the broader contraction in trust, the competitive standing of individual ratings providers experienced notable turbulence. MSCI experienced a dramatic surge, shooting up to the top spot in perceived quality after languishing in 7th place in the 2023 survey. Following MSCI in the perceived quality rankings were CDP, EcoVadis, and S&P Global. Notably, MSCI stood out as the sole provider to achieve an increase in its overall quality score compared to the previous study.
Furthermore, MSCI and EcoVadis captured the top positions in the perceived usefulness of their ESG ratings, jumping to the number one and number two spots, respectively. In the 2023 findings, these same providers held the number five and number seven positions, demonstrating their ability to adapt to changing investor demands and maintain practical utility even amid widespread industry skepticism.
Continued Materiality Amid Shifting Reliance
The survey reveals a fascinating paradox at the heart of modern sustainable investing. While general trust in ratings has waned, institutional reliance on the underlying data for specific functions remains robust. More than half of the investors surveyed—51%—indicated that ESG ratings provide information or data that is materially relevant to investment performance. Although this figure is down slightly from 57% in 2023, it underscores that ESG metrics are far from being abandoned by mainstream finance.
Curiously, the proportion of respondents who agreed that ESG ratings constitute a credible source of information on corporate ESG performance actually increased, rising to 44% from 37% in the previous survey. This suggests that while investors have become more discerning and critical of how ratings are compiled, they still recognize the foundational credibility of well-structured data.
However, when it comes to the hierarchy of decision-making tools, corporate ESG ratings have fallen out of favor as an immediate frontline source. The survey indicated that investor reliance on ESG ratings for direct investment decisions has dropped substantially. Corporate ESG ratings now rank 7th as a useful source of information when making active investment decisions, a steep fall from the top spot they occupied in 2023.
In their place, in-house research and direct engagement with corporate leadership now occupy the number one and number two spots, respectively, followed closely by corporate sustainability reports. Rather than taking third-party scores at face value, investment teams are increasingly leveraging their own analysts to dig into the raw data, cross-examine corporate disclosures, and hold direct dialogues with executive teams.
The Internal Utility of Ratings and Regular Usage
This pivot does not mean third-party ratings are gathering dust. Instead, the survey indicates that investors utilize ESG ratings primarily to support internal sustainability assessment work. When asked how they put these products to work, respondents reported that their top use for ESG ratings and underlying data is to serve as a foundational basis for in-house research on corporate ESG performance. This is followed closely by using the data as a launching pad for engagement with companies regarding their sustainability strategies and performance gaps.
Frequency of use remains high, demonstrating that ESG data is deeply integrated into daily asset management workflows. According to the survey, 58% of investors use ESG ratings and products at least once per week. This includes 36% who report interacting with these ratings multiple times per week. While this usage frequency has come down somewhat since 2023—when 69% reported using the ratings at least once per week—the sheer volume of weekly engagement confirms that ratings remain an indispensable workflow tool.
Looking ahead, institutional sentiment points toward an even greater integration of sustainability metrics. A significant majority, 62% of investors, stated that they anticipate the ongoing emergence and implementation of mandatory sustainability disclosures will actually increase their overall use of ESG data over the next few years. As regulatory frameworks tighten across global jurisdictions, standardized reporting is expected to inject higher reliability into the ecosystem.
Priorities for the Future of ESG Ratings
To adapt to this more sophisticated and demanding market environment, ratings agencies will need to evolve. The survey asked investors to rank their preferences for future changes to make ESG ratings more useful in the years ahead. A greater focus on relevant and material issues emerged as the highest priority by a wide margin. This was followed by a demand for a better linkage between ratings and actual financial performance, as well as improved quality, transparency, and disclosure of the underlying methodologies used by agencies.
Aiste Brackley, Director of the ERM Sustainability Institute, offered perspective on the broader implications of the survey findings.
"Our research points to a growing sophistication in how investors evaluate and use ESG information, placing ratings providers under increasing scrutiny," Brackley commented. "More than half of investors surveyed said ESG ratings provide information that is material to investment performance. ESG data is becoming increasingly embedded in mainstream investment processes, including research, portfolio construction, risk management, and benchmarking."
As the market matures, the era of uncritical reliance on headline scores appears to be drawing to a close. Financial institutions are asserting greater control over their sustainability evaluations, marrying proprietary in-house research with targeted corporate engagement to navigate the complex realities of modern corporate governance, environmental impact, and social responsibility.
