London Stock Exchange Group (LSEG), a global financial markets infrastructure and data provider, has unveiled a comprehensive redesign of its ESG Scores, responding to growing regulatory pressure and market criticism of existing sustainability rating methodologies.
The redesigned scoring suite introduces three modular components — Theme Scores, an overall ESG Score, and an ESG Score Plus — enabling investors to distinguish between operational sustainability performance, broader sustainability impacts, and ESG-related risks such as controversies or sovereign exposure.
The new scores are built from more than 240 indicators across 12 ESG themes, drawing primarily on corporate disclosures and supported by additional external sources where appropriate, covering more than 16,000 companies worldwide.
Key findings from the accompanying research show that the new scores are relatively stable over time, with the median ESG Score rising from 2.3 in 2022 to 2.6 in 2024 across large and mid-caps. The most rapid improvements were recorded in China (+0.5), Japan (+0.4) and wider APAC (+0.3) markets.
The research also found that ESG scores display low or no correlation to most common equity factors, suggesting they are best viewed as an informative risk signal rather than a source of persistent outperformance.
Analysis of long-running ESG-based index families, including the 25-year FTSE4Good series, indicates that relative performance tends to be cyclical, mirroring patterns seen in style factors, with multi-year periods of outperformance typically followed by extended downturns.
The redesign is the result of a multi-year research programme, including the publication of peer-reviewed studies on ESG score construction, and draws on 25 years of sustainable finance innovation. It comes at a pivotal moment for the ESG ratings industry, as regulatory expectations tighten worldwide and scrutiny from investors and other market participants continues to grow.
The new framework is built around four core principles: a suite of modular scores that consolidate sustainability information into clear reference points for portfolio construction; a materiality-led framework designed to give investors a more coherent view of corporate sustainability performance; full transparency around every indicator, weight and methodological decision, underpinned by publicly disclosed data; and a clear separation between performance, risk and impact to avoid conceptual conflation.
For more insights around the ESG Scores, read the full report here.
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