ESG Scores Explained: What They Measure, Why They Disagree, and What Christian Investors Should Know

If you’ve spent any time researching socially responsible investing, you’ve encountered ESG scores—the numerical ratings that purport to summarize a company’s environmental, social, and governance performance on a single scale. MSCI gives a company an “AA.” Sustainalytics assigns a risk score of 23. ISS ESG rates it a “C+.” Bloomberg ESG gives it a 42 out of 100. All four are measuring “ESG,” but they’re measuring it differently—and sometimes coming to opposite conclusions about the same company.

For Christian investors trying to understand whether ESG scores are useful tools for values-aligned investing, this complexity is both practically important and theologically significant. This guide explains how ESG scores work, why major rating agencies disagree so dramatically, what the research shows about their reliability and usefulness, and how Christian investors should think about them.

What ESG Scores Are Supposed to Measure

ESG stands for Environmental, Social, and Governance—three broad categories of non-financial factors that ratings agencies believe affect company performance and risk. The three categories cover:

Environmental: Carbon emissions, energy use, water management, waste and pollution, biodiversity impact, climate risk exposure, and environmental management systems. A company with low carbon emissions, efficient energy use, and robust environmental policies scores well on the E dimension.

Social: Labor practices, employee health and safety, supply chain labor standards, data privacy, product safety, diversity and inclusion, community relations, and human rights policies. A company with strong safety records, fair labor practices, and positive community relationships scores well on the S dimension.

Governance: Board structure and independence, executive compensation, accounting transparency, shareholder rights, anti-corruption policies, and business ethics. A company with an independent board, clean audit history, and shareholder-friendly governance scores well on the G dimension.

The original premise of ESG ratings was that companies with strong performance on these dimensions would have lower risk profiles and better long-term performance—that ESG factors are financially material, not merely ethical. This framing positioned ESG as a tool for financial analysis rather than values screening, which is important for understanding both its appeal and its limitations.

How ESG Scores Are Calculated

Each major rating agency uses a proprietary methodology that combines hundreds of data points into final scores. The broad approach involves:

Data collection: Agencies gather data from company disclosures (annual reports, sustainability reports, proxy statements), regulatory filings, third-party databases, news sources, and proprietary research. The data available varies dramatically by company—large public companies disclose far more than small ones, and disclosure practices vary significantly by industry and geography.

Materiality weighting: Not all ESG factors matter equally for all industries. Carbon emissions matter more for an airline than a software company; supply chain labor standards matter more for a clothing retailer than a utility. Sophisticated rating agencies apply industry-specific materiality weightings that give heavier weight to factors most relevant to each sector.

Scoring and normalization: Individual data points are scored and aggregated, then normalized so scores can be compared across industries. The result is a single composite score or rating—MSCI uses letter grades (AAA to CCC), Sustainalytics uses numerical risk scores (lower is better), ISS uses letter-grade scales, and Bloomberg uses percentage scales.

Ongoing monitoring and updates: Ratings are updated periodically as companies disclose new information and as controversies or major events change risk assessments.

The Problem: Rating Agencies Dramatically Disagree

The most significant research finding about ESG ratings is how little they agree with each other. Academic studies—most prominently the 2019 MIT Sloan research by Florian Berg, Julian Kölbel, and Roberto Rigobon—found that the correlation between major ESG rating agencies was approximately 0.61, compared to correlations above 0.99 between credit rating agencies evaluating the same companies.

To put that in perspective: when S&P and Moody’s evaluate the same company’s creditworthiness, they almost always agree. When MSCI and Sustainalytics evaluate the same company’s ESG performance, they frequently disagree—sometimes substantially. A company that MSCI rates as a leader may be rated a laggard by Sustainalytics.

The researchers identified three primary sources of disagreement:

Scope disagreement: Agencies include different attributes in their assessments. MSCI might include certain supply chain factors that Sustainalytics doesn’t, or weight political contributions differently. If you’re measuring different things, you’ll get different results.

Measurement disagreement: For the same attribute, agencies use different data sources and measurement approaches. Carbon emissions might be measured using company disclosures, industry estimates, or proprietary models—each producing different numbers for the same company.

Weight disagreement: Even when agencies measure the same things, they weight them differently. MSCI might weight governance heavily; Sustainalytics might weight environmental factors more prominently. Different weightings produce different scores from identical underlying data.

The practical result: ESG scores are not objective measurements of corporate behavior. They are subjective assessments shaped by the choices their creators made about what to measure, how to measure it, and how much to weight each component.

The “Rater Effect”: When the Evaluator Matters More Than the Evaluated

One of the more striking findings in ESG research is the “rater effect”—the phenomenon where an ESG rating tells you as much about the rating agency as it does about the rated company.

A 2021 study by Florian Berg and colleagues found that a substantial portion of the variation in ESG scores across rating agencies was attributable to systematic differences in how agencies rate different types of companies—differences that persisted even when controlling for industry and company characteristics. In other words, each rating agency has characteristic biases that affect how it rates all companies.

This means that if you know a company’s rating from one agency, you can often predict whether other agencies will rate it higher or lower—not because the company has better or worse ESG performance by some objective measure, but because different agencies systematically favor or disfavor certain types of companies.

For Christian investors, this should prompt a fundamental question: If ESG ratings are this subjective and inconsistent, what exactly are they measuring—and does that measurement serve your values-based investment goals?

What ESG Scores Don’t Measure: The Values Gaps

Beyond their internal inconsistency, ESG scores have specific content gaps that make them poorly suited to Christian values-based screening:

Abortion and Reproductive Health

Mainstream ESG frameworks typically score companies positively for providing “comprehensive reproductive health benefits,” including abortion coverage. Under major ESG frameworks, a company that adds abortion travel reimbursement to its benefits package improves its ESG score. From a Christian investing perspective, this represents not just a neutral gap but an active inversion—ESG scores reward precisely what Christian investors consider problematic.

This is perhaps the most important values conflict between mainstream ESG and Christian investing. ESG frameworks reflect secular progressive values on reproductive issues; Christian investing frameworks reflect biblical convictions about the sanctity of human life from conception. These are not reconcilable differences.

LGBT Policies and Human Sexuality

ESG frameworks score companies positively for policies affirming LGBT identity and inclusion—non-discrimination policies, gender transition benefits, public advocacy on LGBT issues. Again, from a biblical perspective, some of these corporate policies are problematic, not praiseworthy. ESG scores that reward them are moving in the wrong direction for Christian investors applying biblical standards on human sexuality.

Religious Freedom

ESG frameworks don’t assess companies for whether they protect religious freedom for employees and contractors—whether they accommodate sincere religious beliefs, whether they create hostile environments for employees who hold traditional religious views. For Christian investors concerned about the environment their capital is helping fund, this is a significant gap.

Products and Services Harming Human Dignity

ESG frameworks evaluate companies for environmental impact, labor practices, and governance quality, but they don’t systematically evaluate whether a company’s fundamental business model contributes to or undermines human flourishing. A pornography distribution company with good governance and sustainable energy practices might score well on ESG. A payday lending company that exploits financially vulnerable customers but has an independent board and low carbon footprint might pass ESG screens. The question Christian investing asks—”Is this company doing genuine good in the world?”—is not the question ESG scores answer.

Where ESG Scores Do Have Value for Christian Investors

Despite these significant limitations, ESG scores aren’t useless for Christian investors who understand what they measure and what they don’t.

Governance Data

The “G” in ESG—governance—may be the most consistent and reliable component of ESG scoring. Board independence, accounting quality, executive compensation governance, and anti-corruption policies are relatively objective measures with less ideological loading than E and S factors. Companies with strong governance tend to have better long-term performance and fewer catastrophic failure events. Governance data from ESG rating agencies can be a useful input into company analysis even for investors who reject broader ESG frameworks.

Labor and Safety Practices

Many ESG labor metrics—employee safety rates, supply chain labor standards, worker turnover—align well with biblical criteria for just treatment of workers. A Christian investor who cares about Leviticus 19:13’s instruction to pay workers fairly and Deuteronomy 24:15’s concern for worker welfare can find useful data in ESG labor scores, even if those scores also contain problematic components.

Environmental Data

Carbon emissions data, energy efficiency metrics, and pollution records are relatively objective measures that align with biblical creation care principles (Genesis 2:15). ESG environmental data can inform an assessment of whether a company is being a responsible steward of the environmental resources it uses—though it needs to be distinguished from the political and ideological components that sometimes overlay ESG environmental frameworks.

Controversy Tracking

ESG rating agencies track corporate controversies—major regulatory violations, significant safety incidents, labor disputes, environmental violations—that can flag companies worthy of further scrutiny. Even if the overall ESG score isn’t reliable, the controversy data can be a useful alert system for potentially problematic corporate behavior.

How Christian Fund Families Use ESG Data

Sophisticated Christian fund families don’t reject ESG data wholesale—they use it selectively as an input while applying their own biblical framework. This is the key distinction between ESG investing and biblically responsible investing (BRI): not whether ESG data is used, but whether ESG criteria or biblical criteria drive investment decisions.

Inspire Investing uses proprietary Inspire Impact Scores that incorporate ESG data on environmental stewardship and labor practices while adding biblical criteria (life, sexuality, religious freedom) and excluding the ESG components that conflict with Christian values. They extract the useful data from ESG providers while building their own scoring framework on a biblical foundation.

Eventide Asset Management’s research process draws on ESG data for governance and labor inputs while applying Eventide’s own stakeholder framework that evaluates companies on whether they create genuine value for employees, customers, communities, and society. Eventide analysts use ESG data as one input among many, not as the determinative framework.

Guidestone Funds uses third-party ESG data providers for negative screening assistance while applying its own explicitly Christian criteria for both exclusions and positive selection. The ESG data serves as a research efficiency tool, not a values framework.

The pattern: ESG data as a research input yes; ESG criteria as the evaluative framework, no.

The Greenwashing Problem

A final concern for investors who take ESG scores at face value: greenwashing—the practice of presenting a more ESG-positive image than actual corporate behavior warrants.

Companies have strong financial incentives to achieve high ESG ratings, since high ratings attract ESG-focused institutional capital. This creates incentives to optimize for the metrics that drive ratings rather than the underlying behavior the metrics are supposed to capture—or to present information in ways that game rating methodologies.

Research has documented numerous cases where highly ESG-rated companies have been involved in significant controversies: environmental violations, labor abuses, governance failures. In some cases, the ESG rating reflected the quality of a company’s disclosure practices—how much it reported on ESG factors—rather than the quality of its actual practices. A company that writes detailed sustainability reports about mediocre practices can score better than a company with genuinely good practices that doesn’t publish extensive reports.

For Christian investors, greenwashing isn’t just a financial concern—it’s a character concern. Proverbs 11:1 warns that “dishonest scales are an abomination to the Lord.” A company that crafts its disclosures to achieve good ESG ratings rather than genuinely improving its practices is using those dishonest scales against the investors who trust those ratings.

A Critical but Constructive Approach

The right response to ESG scores’ limitations isn’t to ignore all non-financial corporate information—that would be a pendulum swing too far in the opposite direction. Companies’ labor practices, environmental impacts, governance structures, and community relationships genuinely matter from a Christian stewardship perspective. The question is where to get reliable information about these things and how to evaluate it.

For most Christian investors, the practical answer is to rely on Christian fund families that have done the work of translating biblical values into investment criteria and applying those criteria consistently and rigorously. Funds from Timothy Plan, Inspire, Guidestone, Eventide, Ave Maria, and Praxis all reflect serious engagement with the question of what biblically faithful investing looks like—and all approach that question with more theological rigor than ESG rating agencies, whose frameworks reflect secular values assumptions.

For investors who want to understand the ESG scores attached to their holdings, the practical approach is:

• Treat ESG scores as one data point among many, not as authoritative assessments of corporate virtue
• Pay most attention to the governance component, which is most objective and most consistently reliable
• Use ESG controversy data as an alert system for further research rather than a definitive verdict
• Apply your own values framework to the underlying data rather than accepting the ESG score’s aggregation
• Be particularly skeptical of companies whose high ESG scores reflect disclosure quality rather than behavioral quality
• Recognize that high ESG scores may reflect values that conflict with biblical ones, not just values that align with them

Conclusion: Tools Should Serve Values, Not Replace Them

ESG scores are tools—imperfect, subjective, and shaped by the values of the agencies that create them. As tools, they can be useful inputs into investment research, particularly for governance and labor data. But they cannot substitute for a clearly articulated set of biblical values applied consistently to investment decisions.

The Christian investor’s question isn’t “Does this company have a good ESG score?” but “Does this company’s business reflect the values I’m called to steward my capital in support of?” Those are different questions, and answering the second one properly requires much more than any ESG score can provide.

The theological framework that grounds Christian investing—the conviction that all of life, including financial life, is to be stewarded for God’s glory and humanity’s flourishing—requires tools that reflect that framework. ESG scores, developed by secular researchers for secular purposes, reflect secular values frameworks. Use them where they’re useful; don’t mistake them for a substitute for biblical discernment.