ESG ratings are not ESG assurance, and conflating them is a costly mistake

ESG ratings assess how an organisation's exposure to and management of ESG risk compares to its peers, produced by rating agencies from disclosed data, survey responses and proprietary models. They are not assurance: rating agencies don't independently verify the data they're scoring, they apply their methodology to whatever's been disclosed. ESG assurance is the opposite kind of judgement, an independent opinion on whether the disclosure itself is accurate and free from material misstatement. It says nothing about whether the underlying performance is good.

The asymmetry is the whole point: a company with genuinely poor sustainability performance that discloses it accurately gets a fair assurance opinion and a poor rating, which is the system working correctly. A company with good performance that discloses it inaccurately might get a better rating than it deserves, and shouldn't get an assurance opinion at all. Ratings measure performance as perceived; assurance measures whether the disclosure can be trusted. You need both precisely because they answer different questions.

The practical interaction matters more than the theory: rating agencies mostly score off whatever data you've disclosed, so an unexpectedly low rating is very often a disclosure problem wearing a performance costume. Before assuming the market has judged your sustainability performance harshly, check whether it actually judged your submission's completeness and consistency instead.