ESG criteria: what the law, the standards and the raters measure

“ESG criteria” is used for three different things, and most confusion about them comes from mixing the three.

The first is what the law requires a company to publish: figures and statements with a statutory owner, a scope test and a consequence for getting them wrong.

The second is what a reporting standard asks for: UK SRS, the ISSB’s standards and the SASB metrics define criteria a company discloses against when it uses them — voluntarily, or on a comply-or-explain basis for listed companies under the FCA’s final rules.

The third is what raters and investors choose to look at, with their own weights and methods, none of which a company has to adopt.

A company is well placed when one dataset answers all three, and the first two are the ones with a provision behind them.

The pillars these criteria sit under, and the UK duty behind each, are on the ESG pillars.

Climate dominates the environmental criteria because it is the one topic both statute and the standards measure in numbers.

SECR requires every quoted company and large unquoted company outside the exemption to publish energy use in kWh, the emissions calculated from it, at least one intensity ratio and the methodology; the government’s reporting guidelines show how.

Its 2026 evaluation found 19,900 organisations in scope, which makes SECR the widest source of comparable UK emissions criteria.

UK SRS S2 goes further, with seven cross-industry metric categories every reporting company addresses.

Greenhouse gases are measured under the GHG Protocol Corporate Standard, with Scope 2 on a location basis and Scope 3 by category; the other six turn climate risk into amounts and percentages of assets and activities, capital, an internal carbon price and remuneration.

On the internal carbon price, the standard asks whether and how one is used and the price per tonne, so a company that uses none still has something to say.

Water and biodiversity have no general UK company reporting duty; the TNFD’s framework is voluntary and its technical programme is closing as the ISSB takes nature forward.

Rating agencies select their own criteria and weights, and two of the most used are built on opposite principles.

MSCI’s ESG Ratings are industry-relative: Key Issue scores are weighted, normalised against the industry peer set and turned into one of seven letters from AAA to CCC, and MSCI says the result is not absolute.

Its weights floor governance at 33%, and environmental and social Key Issues typically make up 5% to 30% of the rating each.

MSCI’s own documents disagree on how many Key Issues there are — 33 in the ratings methodology, 35 in the guide for issuers — so a count should always name its document.

Sustainalytics’ ESG Risk Ratings measure unmanaged risk on an absolute, open-ended scale from zero, where lower is better, in five bands from Negligible to Severe.

A company can be MSCI AAA and Sustainalytics High risk without either being wrong, and no mapping converts one into the other.

Under the ESG Ratings Order 2025, providing an ESG rating likely to influence an investment decision becomes a regulated activity on 29 June 2028; the FCA consulted on its rules in CP25/34, which closed on 31 March 2026.