Standardizing ESG scores may simplify corporate greenwashing

Standardizing ESG scores could inadvertently make corporate greenwashing easier by creating predictable targets for executives. New research suggests that when ESG scoring methodologies become standardized and predictable, executives can more easily manipulate them to improve their pay without genuinely enhancing corporate sustainability. The current system of diverse ESG rating methodologies, while inconsistent, may offer a benefit by making it harder for companies to game the system across multiple rating providers.