ESG RATINGS AND INDEXES: BENEFITS AND LIMITATIONS

Eleonora P. Stancheva-Todorova

Economy & Business Journal, 2025, vol. 19, issue 1, 64-81

Abstract: In recent years, environmental, social and governance (ESG) ratings and indices have gained increasing importance as tools for assessing corporate sustainability and guiding responsible investment. However, along with their popularity, debates about their reliability, comparability and real impact have intensified. The purpose of this paper is to critically examine the main advantages and disadvantages of ESG ratings and indices. It explores their nature, function and application in modern business and investment practice by applying comparative approach. The analysis is based on a systematic review of leading scientific publications, focusing on methodological differences between ESG ratings, issues with transparency and comparability of assessments, as well as on the specifics of ESG indices as a basis for sustainable investing. The paper presents the key characteristics of ESG ratings and indices, distinguishes their roles and analyses the challenges associated with their application, including the risk of ESG-washing and shortcomings in considering sector specifics. The need for increased transparency, harmonisation of methodologies and strengthening regulatory oversight is emphasized, for ESG ratings and indices to effectively fulfil their role in the process of promoting sustainability and good corporate governance.

Keywords: esg ratings; esg indices; corporate sustainability; transparency; regulatory oversight; methodology comparability (search for similar items in EconPapers)
JEL-codes: A (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:isp:journl:v:19:y:2025:i:1:p:64-81

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