ESG Rating System in Sustainable Finance: Challenges and Suggestions for Improvement

Abstract

As global attention to sustainable development intensifies, Environmental, Social, and Governance (ESG) criteria have become vital indicators for assessing corporate non-financial performance. Nonetheless, current ESG rating systems encounter several challenges, including lack of standardization, insufficient data transparency, and market dependence on rating outcomes, which impede their widespread application in investment decisions. This paper systematically reviews the construction logic and practical applications of existing ESG rating systems, providing an in-depth analysis of the disparities among major rating agencies concerning indicator selection, weight allocation, and data sources. By elucidating the impact of these disparities on rating accuracy and consistency, the paper proposes a series of improvement recommendations, such as the standardization of global rating criteria, enhancement of data transparency, and the utilization of emerging technologies to optimize the rating process. This research aims to offer theoretical foundations and practical insights for the enhancement of ESG rating systems, facilitating a more precise assessment of corporate sustainability performance by investors. The ultimate objective is to advance the global green economy transition and provide support to policymakers for further refinement of regulatory frameworks.