ESG ratings assess the sustainability performance and sustainability risks of companies. They consolidate the relevant information into a tangible, comparable indicator or overall assessment. In this way, they help investors, lenders, and other capital market players to better assess the resilience and sustainability of business models—and at the same time to determine (financial) risks and future returns more accurately.
Good ESG ratings facilitate access to capital and reduce financing costs for companies. The ratings of leading ESG rating agencies are increasingly being taken into account by investors when making investment decisions and by banks when granting loans or setting interest rates. For example, companies with strong ESG profiles – and correspondingly good ESG ratings – often receive better credit terms for green bonds or sustainability-linked loans, as they are considered less risky and their business activities are recognized as having a positive impact. They thus benefit from sending a clear signal to the market that they are taking responsibility and thinking (long-term) about the future.
There are three key reasons why ESG ratings will become even more important in the future:
1. Less regulation, more uncertainty – ESG ratings provide guidance
After years of increasing regulation, the pendulum is beginning to swing in the other direction. With the Omnibus Delegated Act and the relaxation of reporting requirements under the EU Taxonomy and CSRD, the pressure on companies is easing – but so is the uniformity of disclosure. Where clear requirements are being withdrawn, new scope is emerging, and there is a growing risk that sustainability reports will once again become more inconsistent, selective, and difficult to compare.
This is precisely where ESG ratings are gaining in importance. They close the gap created by declining regulatory requirements by evaluating and comparing company data and activities according to their own consistent criteria. They provide guidance and continuity for investors, banks, and analysts. While regulatory guidelines are becoming less clear, ESG rating agencies are increasingly ensuring consistency and comparability on the capital market with their own criteria catalogs.
2. Growing ESG investment volume increases the importance of comparable valuations
More and more institutional investors are turning to sustainable investments. This is indicated by both current data from major asset managers and independent market studies. BlackRock, for example, increased its sustainable investment volume, i.e., assets in sustainable and transition investing, by more than USD 200 billion from 2023 to 2024 to around USD 1 trillion. At the same time, the proportion of assets under management in mutual funds managed according to a sustainable investing approach (SFDR Art. 8/9) rose from 61% (2023) to 64% (2024) at Allianz Global Investors. Other large asset managers such as Amundi have recently shown a similar picture. Market studies also show that sustainable funds (SFDR Art. 8/9 funds) are continuing to gain in importance. According to PwC, their volume in Europe increased from EUR 6.2 trillion (2023) to EUR 7.4 trillion (2024).
With the rise of ESG-oriented investments, the need for reliable and comparable sustainability assessments is growing – and with it the importance of ESG ratings.
Leading investment firms such as BlackRock, Amundi, and Allianz Global Investors regularly confirm that they incorporate assessments from rating providers such as ISS ESG, MSCI, and Sustainalytics into their analyses and investment decisions. ESG ratings are thus becoming an increasingly important factor in capital allocation.
3. Resilience and (long-term) sustainability are becoming key factors
In times of high market volatility, accelerated transformation, and a multitude of environmental risk factors, capital market players are increasingly assessing the robustness and (long-term) sustainability of business models. ESG ratings provide a valuable point of reference in this regard. Using clear, consistent criteria, they assess how comprehensively and proactively risks and opportunities are managed, how responsibly a company acts, and how future-oriented its strategy is.
Their assessments help investors, lenders, and analysts to better evaluate how resilient business models are and how well companies ensure long-term value creation. Companies with high ESG ratings often demonstrate stronger risk management structures, greater consistency, greater adaptability to environmental influences, and an overall more long-term orientation. Overall, ESG ratings help to make resilience, competitiveness, and future potential measurable and comparable—factors that are becoming increasingly important in the current business environment.
Especially in an environment with fewer regulatory requirements, rising ESG investment volumes, and a stronger focus on resilience, the following applies: Those who neglect ESG ratings risk the market reacting with risk premiums—and financing costs rising. Instead of a potential “greenium” or “socium,” companies then face a so-called “brown penalty,” i.e., a price premium for perceived ESG weaknesses by investors and banks. This makes it all the more important for companies to consistently monitor and optimize their ESG ratings.
Optimize ratings and prepare specifically for green financing with the ESG Rating Impact Tool
We have been supporting companies from a wide range of industries for around 10 years in analyzing and optimizing their ESG ratings. In this context, we have examined numerous ratings in detail, are in close contact with analysts from leading ESG rating agencies, and are familiar with their rating logic from practical experience. We have also developed our own tool, the ESG Rating Impact Tool, for a structured, systematic improvement process. With the help of this tool and our extensive experience, we can specifically strengthen your company’s ESG ratings. Good ESG ratings are a key factor in accessing cheaper capital on the stock market—and in the current environment, they are becoming even more important.
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About cometis
For 25 years, we have been combining capital market expertise with in-depth sustainability analysis and structured consulting approaches. In over 1,000 mandates, we have learned to be both a long-term partner and a flexible source of expertise. Whether it’s an IPO, an M&A transaction, a (double) materiality analysis, or the complex field of ESG regulation, we bring clarity to challenging issues and create a solid basis for decision-making. Our services are tailored to promote exactly what matters to you— whether it is economic success, sustainable impact, or, ideally, both.