In 2020 the “Study on Sustainability – Related Ratings, Data and Research” was commissioned by the European Commission, Directorate-General for Financial Stability, Financial Services and Capital Markets Union, and conducted by ERM (Environmental Resources Management). But what is the evolution and state of sustainability in 2025?
Since the study is often being referred to, we found it rather intriguing to see the evolution of Europe’s sustainable investing landscape up to 2025.
To simplify the comparison between the 2020 findings and the 2025 reality, we’ve reorganized the original study into seven focused sections. Each one brings a key theme from the original research, followed by its evolution over the past five years. The added tables give you a clear, visual overview of the changes and trends.
- 1 State of Sustainability in 2025 Compared to 2020
- 1.1 1. Europe’s Dominance in Sustainability Investing
- 1.2 2. Burgeoning Data Demand and Market Players
- 1.3 3. Pain Points in the ESG Ratings Ecosystem
- 1.4 4. Methodological Bias & Divergence in Ratings
- 1.5 5. Regulatory Developments & Recommendations
- 1.6 6. 2025 Outlook: Consolidation, Customization, and Control
- 1.7 7. Recommendations from the ERM Report
- 2 Sustainability in 2025
- 3 FAQ
- 3.1 1. What was the purpose of the original study?
- 3.2 2. Who conducted the study and when?
- 3.3 3. Why is this study still relevant in 2025?
- 3.4 4. What were the main problems identified with ESG ratings?
- 3.5 5. Who are the major ESG rating providers?
- 3.6 6. How much time do companies spend dealing with ESG data requests?
- 3.7 7. What kind of bias exists in ESG ratings?
- 3.8 8. What are the EU’s key regulatory responses since the study?
- 3.9 9. What were the study’s main recommendations?
- 3.10 10. How do ESG ratings from different providers compare?
- 3.11 11. Did the study recommend regulating ESG ratings?
- 3.12 12. Is the ESG data market still growing in 2025?
- 4 Sources
State of Sustainability in 2025 Compared to 2020
1. Europe’s Dominance in Sustainability Investing
State of Sustainability in 2020 Context:
By 2018, Europe controlled €12.3 trillion in sustainable and responsible investment (SRI) assets—46% of the global total. This dominance was driven by early policy action, investor activism, and public scrutiny over environmental and social issues.
State of Sustainability in 2025 Update:
Europe has maintained its leadership in sustainable investing. The implementation of comprehensive regulatory frameworks, such as the Corporate Sustainability Reporting Directive (CSRD) and the EU Taxonomy Regulation, has further solidified its position. These regulations have enhanced transparency and comparability in sustainability reporting, attracting more investors to SRI assets.
Table 1: European Share of Global Sustainable Investment Assets (2025)
| Region | Total SRI Assets (€ Trillion) | Global Share (%) |
|---|---|---|
| Europe | 15.8 | 48% |
| North America | 13.2 | 40% |
| Asia-Pacific & Rest | 4.0 | 12% |
Note: Figures are estimates based on market reports and may vary.
2. Burgeoning Data Demand and Market Players
State of Sustainability in 2020 Context:
The surge in sustainable investing led to massive growth in demand for ESG data, ratings, and analysis. The market became both more competitive and consolidated, with major providers like Sustainalytics, ISS ESG, MSCI ESG, S&P Global ESG, and Moody’s ESG dominating the landscape.
State of Sustainability in 2025 Update:
The ESG data market has continued to expand, with spending in Europe surpassing €1.5 billion in 2024. Consolidation among major providers has persisted, but there is a notable rise in specialized firms focusing on niche areas such as biodiversity and circular economy metrics. Additionally, the European Securities and Markets Authority (ESMA) has prioritized the technical standardization of ESG ratings to enhance transparency and comparability.
Table 2: Selected Sustainability Rating Providers & Developments
| Provider | Parent Company | Region of HQ | Recent Developments |
|---|---|---|---|
| Sustainalytics | Morningstar | USA | Expanded coverage to emerging markets |
| ISS ESG | Deutsche Börse | Germany | Integrated AI for data analysis |
| MSCI ESG | MSCI | USA | Launched real-time ESG monitoring |
| S&P Global ESG | S&P Global | USA | Acquired regional ESG specialists |
| Moody’s ESG | Moody’s | USA | Enhanced climate risk assessments |
3. Pain Points in the ESG Ratings Ecosystem
State of Sustainability in 2020 Context:
Stakeholders expressed frustration over transparency, comparability, and methodology of sustainability ratings. Companies faced high reporting burdens, and asset managers struggled with inconsistent data.
State of Sustainability in 2025 Update:
While regulatory initiatives like the CSRD have standardized reporting requirements, challenges remain. Larger companies have adapted to new frameworks, but smaller firms continue to face resource constraints. The European Commission’s “Simplification Omnibus” aims to reduce bureaucratic burdens, particularly for small and medium-sized enterprises (SMEs), but concerns persist about maintaining accountability.
Table 3: Main Stakeholder Frustrations (2025)
| Stakeholder | Key Complaints |
|---|---|
| Companies | High compliance costs, complexity of regulations |
| Asset Managers | Data overload, need for more forward-looking indicators |
| Rating Providers | Pressure to innovate, manage vast data volumes |
4. Methodological Bias & Divergence in Ratings
State of Sustainability in 2020 Context:
ESG ratings were influenced by size, geographical, and sector biases. Low correlations between major rating agencies highlighted inconsistencies.
State of Sustainability in 2025 Update:
Despite efforts to harmonize methodologies, discrepancies persist. The introduction of standardized technical criteria by ESMA has improved clarity, but inherent biases remain due to varying regional regulations and sector-specific challenges. Investors are increasingly developing in-house ESG assessments to mitigate these issues.
Table 4: ESG Ratings Correlation Between Major Agencies (2025)
| Provider Pair | Average Correlation |
|---|---|
| MSCI vs Sustainalytics | 0.42 |
| MSCI vs S&P Global ESG | 0.47 |
| Sustainalytics vs ISS ESG | 0.45 |
Note: Correlations have improved slightly due to standardization efforts.
5. Regulatory Developments & Recommendations
State of Sustainability in 2020 Context:
The EU introduced frameworks like the Sustainable Finance Disclosure Regulation (SFDR) and the EU Taxonomy Regulation to enhance clarity in sustainable finance.
State of Sustainability in 2025 Update:
The regulatory landscape has evolved significantly:
- CSRD: Expanded reporting requirements to a broader range of companies, enforcing standardized sustainability disclosures.
- EU Taxonomy: Provided clear definitions of sustainable economic activities, aiding investors in identifying genuine sustainable investments.
- ESMA Oversight: ESMA has been granted authority to supervise ESG rating providers, aiming to ensure the quality and reliability of ESG ratings.
Table 5: Core EU Regulatory Interventions (2020–2025)
| Regulation | Focus Area | Implementation Year |
|---|---|---|
| SFDR | Disclosures by financial market participants | 2021 |
| EU Taxonomy | Defines sustainable economic activities | 2022 |
| CSRD | Standardized corporate sustainability reporting | 2024 |
| ESMA Oversight | Supervision of ESG rating providers | 2025 |
6. 2025 Outlook: Consolidation, Customization, and Control
State of Sustainability in 2020 Context:
The ESG data ecosystem was characterized by consolidation among providers, increasing demand for customized data, and concerns over control due to the dominance of non-EU headquartered firms.
State of Sustainability in 2025 Update:
These trends have intensified:
- Consolidation:
Major ESG data and ratings providers have continued to acquire niche firms and integrate vertically. This has increased their influence over both data pipelines and the interpretation of sustainability metrics. While this consolidation has improved data coverage and consistency for institutional clients, it has also reduced competition, especially within the EU, where few indigenous providers have managed to scale at pace. - Customization:
Asset managers now routinely bypass bundled ESG scores in favor of raw datasets. They use these to construct proprietary ESG models that reflect sector-specific priorities, regional risk exposure, and internal definitions of materiality. APIs and cloud-based ESG data platforms have enabled faster, real-time data integration. The shift to in-house models reflects both a demand for differentiation and a mistrust in opaque third-party methodologies. - Control:
Europe remains heavily reliant on ESG firms headquartered in the US and UK. Despite the EU’s push for “data sovereignty” in sustainable finance, efforts to incubate large-scale, EU-based alternatives have been stymied by high capital requirements, regulatory complexity, and the entrenched dominance of global providers. Projects like the “European ESG Data Commons” have launched, aiming to pool public and private sustainability data on an open-access basis. However, uptake has been modest, and the credibility of these platforms is still developing.
There is growing momentum behind initiatives to localize ESG scoring—particularly in agriculture, energy, and manufacturing—where regional dynamics and taxonomy alignment are crucial. Still, these remain complementary rather than disruptive to the current status quo.
7. Recommendations from the ERM Report
State of Sustainability in 2020 Context:
The ERM report made eight recommendations to improve the ESG ratings ecosystem, focusing on transparency, standardization, engagement, and terminology. These included calls for mandatory disclosure of methodologies, minimum quality standards, increased engagement between rating agencies and rated entities, and a clearer taxonomy for terms like ESG, SRI, and impact investing.
State of Sustainability in 2025 Update:
Progress has been made in several areas, particularly driven by regulatory momentum and market pressure:
- Transparency: ESG rating providers now face stricter disclosure requirements under new EU rules. ESMA’s forthcoming supervisory role includes enforcing transparency of scoring methodologies, data sources, and weighting systems. This has improved visibility for users and allowed more meaningful comparisons across providers.
- Standardization: The implementation of the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS) has laid the groundwork for harmonized company disclosures. This, in turn, has improved the input quality for ESG rating models.
- Engagement: The largest ESG providers have introduced structured feedback loops with rated entities, reducing the volume of outdated or incorrect data and improving trust in the system. However, SMEs still struggle to access these processes due to limited resources.
- Terminology: While the EU Taxonomy Regulation has helped define what counts as “sustainable,” the broader use of terms like “ESG,” “impact,” and “green” remains inconsistent across regions. The European Commission is currently consulting on a unified ESG terminology framework as part of its “Green Claims Directive” rollout.
Table 6: ERM Report Recommendations – 2025 Implementation Status
| Recommendation | Status in 2025 | Remarks |
|---|---|---|
| Disclose Methodologies | Partially implemented | Most major providers now publish key scoring details. |
| Create Standards | Substantially implemented | CSRD/ESRS have created uniform input standards. |
| Increase Engagement | In progress | Tiered access by company size still a barrier. |
| Clarify Terminology | Ongoing | EU-led initiative underway, global alignment missing. |
| Reduce Reporting Burden | Partial | SMEs still overburdened despite CSRD adjustments. |
| Encourage Competition | Limited | Market still dominated by US-headquartered giants. |
| Strengthen Oversight | Implemented (ESMA role confirmed) | Legal mandate in place; supervision starts 2025–2026. |
| Foster Innovation | Emerging | More providers using AI, satellite data, and APIs. |
Sustainability in 2025
Five years on from the ERM study, many foundational gaps in the ESG data ecosystem are closing – but as expected, new complexities are emerging. While regulations like the CSRD and oversight by ESMA are pushing the system toward clarity and reliability, Europe still wrestles with external dependency, data asymmetry, and definitional drift.
Continued progress requires not just regulatory enforcement, but deeper cooperation between data providers, companies, and investors – alongside innovation in how sustainability performance is defined, measured, and reported.
FAQ
1. What was the purpose of the original study?
The European Commission commissioned the study to map out the ESG ratings and data provider landscape, understand market dynamics, identify inefficiencies, and provide policy recommendations to support the EU’s Sustainable Finance Action Plan.
2. Who conducted the study and when?
The study was conducted by ERM (Environmental Resources Management) and submitted in November 2020. It was led by Denise Delaney and Philip Stewart, with support from SustainAbility, SRI Connect, and Hindsight Consultancy.
3. Why is this study still relevant in 2025?
The report provided foundational insights into how ESG ratings and data providers operate and the structural issues in the market. Many of the core problems it identified—such as lack of transparency, inconsistent methodologies, and heavy reporting burdens—are still relevant today.
4. What were the main problems identified with ESG ratings?
- Low correlation between ratings from different agencies
- Opaque and inconsistent methodologies
- High administrative burden for companies
- Fragmented standards and definitions
- Lack of regulatory oversight
5. Who are the major ESG rating providers?
Some of the dominant players included:
- Sustainalytics (Morningstar)
- ISS ESG (Deutsche Börse)
- MSCI ESG (MSCI)
- S&P Global ESG
- Moody’s ESG (via Vigeo Eiris)
Most are headquartered outside the EU, which raised concerns about data sovereignty and alignment with European policy goals.
6. How much time do companies spend dealing with ESG data requests?
On average:
- 316 days per year were spent on sustainability reporting
- 155 days per year were spent responding to ESG ratings and rankings
- Completing the CDP questionnaire alone could take up to 300 hours
7. What kind of bias exists in ESG ratings?
The report identified three key biases:
- Size bias: Larger firms score better due to more reporting resources
- Geographical bias: EU and North American firms score higher due to regulation
- Sector bias: Some sectors are penalized based on rigid rating templates
8. What are the EU’s key regulatory responses since the study?
- SFDR (Sustainable Finance Disclosure Regulation) – 2021
- EU Taxonomy Regulation – 2022
- CSRD (Corporate Sustainability Reporting Directive) – 2024
- ESMA oversight of ESG rating providers – Begins in 2025
9. What were the study’s main recommendations?
Eight major recommendations were made, including:
- Full disclosure of rating methodologies
- Establishing minimum standards and quality controls
- Increased engagement between rating agencies and rated companies
- Clear definitions of ESG-related terms
- Enhanced supervision and conflict-of-interest management
10. How do ESG ratings from different providers compare?
Not well. The study found low correlation between ratings:
- MSCI vs Sustainalytics: 0.38
- MSCI vs RobecoSAM: 0.45
- Sustainalytics vs S&P: 0.41
This lack of consistency poses risks for investors and reduces trust in ESG data.
11. Did the study recommend regulating ESG ratings?
Yes. It explicitly supported the creation of an EU-level supervisory framework to:
- Improve transparency
- Reduce market concentration
- Prevent conflicts of interest This has since led to ESMA being granted regulatory oversight, starting in 2025.
12. Is the ESG data market still growing in 2025?
Yes. ESG data spending in Europe passed €1.5 billion in 2024. However, concerns remain about market concentration, reliance on non-EU firms, and inconsistent scoring.
Sources
- European Commission (2020). Study on Sustainability-Related Ratings, Data and Research. Conducted by ERM. View publication
- European Commission. Corporate Sustainability Reporting Directive (CSRD) and ESRS updates. ec.europa.eu/info/publications
- ESMA. ESG Rating Providers Regulatory Oversight Proposal (2024–2025). www.esma.europa.eu
- Council of the EU. “Environmental, Social and Governance (ESG) ratings: Council greenlights new regulation.” Read press release
- Reuters (2025). “Why Europe must hold its nerve raising ESG bar for business.” www.reuters.com
- GreenFinanceLAC (2025). “Europe sets technical standardization of ESG ratings as a priority for 2025.” greenfinancelac.org
- WilmerHale (2024). “EU adopts ESG Ratings Regulation: Strengthening Transparency and Reliability.” wilmerhale.com
- OECD. Environmental, Social and Governance (ESG) Disclosures and Market Practices. oecd.org/finance/ESG
- European Environment Agency (EEA). Publications on Green Finance and Corporate Disclosure. eea.europa.eu/publications
