ESG Ratings
Why the Same Company Can Score Differently Across MSCI, Sustainalytics and CRISIL
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Introduction
A company can hold a top-tier MSCI rating and a middling Sustainalytics score in the same year, on the same underlying disclosures, and neither number is wrong.
As ESG ratings increasingly feed into index inclusion, portfolio construction, and sustainability-linked lending in India, this divergence has real financial consequences rather than being a rounding error.
This article explains why MSCI, Sustainalytics, and CRISIL ESG Ratings can score the same company differently, by unpacking what each agency actually measures and how.
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Why ESG Rating Divergence Exists?
An ESG rating is a third-party opinion built from a proprietary methodology, not an audited fact or a regulatory certification. Because no single global standard governs how these opinions must be built, unlike credit ratings, which follow more standardized frameworks, different agencies are free to define materiality, scope, and scoring scales differently, and they do.
Most of the divergence traces back to one structural choice: what question the rating is actually answering. Some agencies ask how exposed a company is to financially material risk and how well it manages that exposure. Others ask how much of that risk remains unmanaged in absolute terms. Others build their framework around a specific regulatory and disclosure context. These are related questions, but they are not the same question, and answering them produces different numbers even when the underlying company data is identical.
An independent working paper examining ESG ratings for 100 Indian companies across MSCI, Sustainalytics, and CRISIL found that even when overall scores land close together, the weighting given to individual environmental, social, and governance factors diverges substantially across agencies. That gap in weighting, more than any error in the underlying data, is usually what drives visible divergence.
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How Each Agency Actually Builds Its Score?
How MSCI ESG Ratings Work?
MSCI evaluates each company against industry peers using GICS sub-industry classifications, scoring it on Risk Exposure and Risk Management for each material Key Issue. These component scores combine into an Industry-Adjusted Score, which is mapped to a seven-point letter rating from AAA to CCC. Because the rating is industry-relative, a company is compared only against its peers, not the entire market, and the emphasis throughout is on financially material risk rather than broader environmental or social impact.
How Sustainalytics ESG Risk Ratings Work?
Morningstar Sustainalytics starts from a different question. It estimates a company's exposure to material ESG issues at the subindustry level, then separates that exposure into risk that can realistically be managed through policy and practice, and risk that is inherently unmanageable given the business model. What remains after subtracting managed risk from exposure is the unmanaged risk score, an absolute number that places every company into one of five categories from negligible to severe. A lower score is better, and because the scale is absolute, companies in different sectors can be compared directly on it in a way MSCI's industry-relative letters are not designed for.
How CRISIL ESG Ratings Work?
CRISIL ESG Ratings & Analytics Ltd, a SEBI-registered Category 1 ESG Rating Provider, builds its methodology specifically around the Indian regulatory context. Its ratings assess several hundred key performance indicators across roughly 65 sectors, drawing on BRSR and BRSR Core disclosures alongside global frameworks such as GRI and the ISSB standards. Scores run from 0 to 100 and reflect cross-sector, relative benchmarking of Indian issuers, with a distinct Core ESG Rating limited to BRSR Core parameters. A controversy-based deflator is applied when a company faces regulatory action, compliance lapses, or other material ESG incidents.
Where the Numbers Actually Diverge?
In practice, divergence tends to concentrate in a few places: whether the rating is relative to industry peers or absolute across the market, how heavily each agency weights environmental versus social versus governance factors, and how each treats controversies and incidents. An independent comparison of 100 Indian companies found that even when overall ESG scores across MSCI, Sustainalytics, and CRISIL were broadly similar, the underlying component weightings differed enough to change how a company would rank against different peer sets.
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Reading Multiple ESG Ratings in Practice
How to Read Multiple Ratings Without Confusion?
Before comparing a number across agencies, check whether the scale is relative, like MSCI's industry letter grade, or absolute, like Sustainalytics' risk score or CRISIL's 0-100 scale. A relative score tells you standing within an industry; an absolute score tells you standing on its own terms.
What Companies Can Actually Control?
Improving disclosure completeness, the quality of BRSR reporting, and responsiveness during analyst review periods tends to help scores across all three agencies, even though it will not close every methodology gap. Since CRISIL's assessment draws directly on BRSR and BRSR Core disclosures, stronger domestic reporting has a particularly direct effect there.
Mistakes to Avoid?
Do not average scores across agencies as though they measure the same thing, since a relative letter grade and an absolute risk score are not interchangeable. Do not assume a lower Sustainalytics score reflects the same underlying performance as a lower MSCI letter grade, since the two scales are answering different questions.
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Conclusion
ESG rating divergence across MSCI, Sustainalytics, and CRISIL reflects genuine differences in what each agency measures, relative risk management, absolute unmanaged risk, or India-specific regulatory alignment, not measurement error or inconsistency in the underlying company data.
The more useful skill for companies and investors alike is reading the methodology behind a number, rather than treating any single agency's score as the definitive answer.
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Frequently Asked Questions
Why do ESG ratings differ across agencies like MSCI, Sustainalytics, and CRISIL?
They differ because each agency answers a different underlying question: relative risk management for MSCI, absolute unmanaged risk for Sustainalytics, and India-specific regulatory alignment for CRISIL.
What is the difference between MSCI and Sustainalytics ESG ratings?
MSCI assigns an industry-relative letter grade from AAA to CCC based on risk exposure and management, while Sustainalytics assigns an absolute numeric score based on unmanaged risk, where a lower number is better.
How does CRISIL's ESG rating differ from global rating agencies?
CRISIL ESG Ratings & Analytics builds its 0-100 scale specifically around the Indian regulatory context, drawing directly on BRSR and BRSR Core disclosures alongside global frameworks.
Can a company have a good MSCI rating and a poor Sustainalytics rating at the same time?
Yes, because the two scales measure different things, industry-relative management performance versus absolute unmanaged risk, so a company can rank well on one and poorly on the other.
How should investors interpret conflicting ESG ratings for the same company?
Investors should check what each agency's scale actually measures, relative or absolute, before comparing numbers, rather than treating any single score as the full picture.
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