Why do larger companies get better ESG scores even when they aren't more sustainable?
A major evidence gap is the 'size bias' in ESG data: larger companies tend to get higher ESG scores simply because they have more resources to collect and report data, not necessarily because they are more sustainable. A 2023 study of the widely-used Refinitiv ESG database confirmed that this bias persists even after the provider claimed to have minimized it [3]. This means that asset managers using ESG scores to pick investments may be systematically favoring large-cap stocks over smaller, potentially greener firms, undermining the purpose of ESG integration.
The same study found that this bias is not a minor artifact—it is statistically significant and affects portfolio decisions [3]. For investors, this means relying on raw ESG scores without adjusting for company size can lead to distorted comparisons. The implication is clear: ESG data systems need to either normalize scores by company size or provide separate metrics that are not confounded by reporting capacity.
Why do different ESG ratings give conflicting scores for the same company?
ESG data systems suffer from a lack of standardization, leading to conflicting ratings that confuse investors and companies alike. A 2025 analysis of Chinese manufacturing firms highlighted that institutional complexity—such as conflicting domestic and international rating weights—drives significant ESG rating divergences [1]. This means a company might be rated 'A' by one agency and 'C' by another, making it nearly impossible for investors to know which rating to trust.
Compounding this, a 2023 review of major ESG frameworks found that most fail to provide reliable, meaningful, and measurable metrics, with a particular neglect of the 'social' (S) dimension [5]. The 'S' in ESG—covering labor practices, human rights, and community impact—is often the least transparent and least consistently reported component. The same study proposed a software framework called 'ESG Maturity' to address these gaps by delivering tailored, sector-specific reports, but noted that no existing framework fully solves the problem [5].
Can technology like blockchain and big data close the evidence gaps?
Digital tools show real promise for closing some evidence gaps, but they are not a silver bullet. The largest study here, covering 23,660 Chinese manufacturing firms from 2013 to 2023, found that digital transformation—including blockchain and IoT—can significantly enhance ESG data quality: blockchain alone can reduce ESG report errors by 65%, and IoT data can increase green premiums by 2.3% [1]. However, the same study explicitly noted that 'environmental data gaps' remain a key limitation, meaning even advanced digital systems still lack complete, reliable environmental data [1].
A separate 2024 study on blockchain in financial accounting confirmed that blockchain's tamper-resistant features can enhance transparency in ESG reporting, but described this potential as 'underexplored' and based largely on case studies rather than large-scale implementation [4]. Meanwhile, a 2025 study on China's big data pilot zones found that data elements (as a production factor) significantly improve ESG performance through channels like green innovation and better disclosure, but the effect varies widely by firm size, industry, and region [2]. Together, these studies suggest that while technology can help, the fundamental gaps in data standardization, completeness, and bias require systemic fixes—not just digital tools.
About These Sources
This answer is built on 5 peer-reviewed studies — published from 2023 to 2025, 3 from 2024 or later, 2 in Q1 journals, collectively cited 156 times — selected as the most relevant from 5 studies that passed quality screening, drawn from 71 papers retrieved from a database of over 500 million.
Sources used in this answer
THE ROLE OF ESG RISK ASSESSMENT IN CORPORATE PROJECTS: A MULTIDIMENSIONAL THEORETICAL AND EMPIRICAL ANALYSIS
In the largest study here (23,660 Chinese manufacturing firms, 2013–2023), ESG performance significantly boosted corporate development (β=0.185), with digital transformation amplifying value by 23.7% per digitization unit; however, environmental data gaps and conflicting rating weights remain key limitations.
Data elements, policy innovation, and corporate ESG: Insights from China's national big data comprehensive pilot zones
Using a quasi-natural experiment with China's 2015 big data pilot zones, this study found that data elements significantly improve ESG performance through green innovation, better disclosure, and reduced pay gaps, but effects vary by firm size, industry, and region.
Size bias in refinitiv ESG data
This study confirmed that a significant size bias persists in the widely-used Refinitiv ESG database, meaning larger firms get higher ESG scores simply due to reporting resources, not necessarily better sustainability—critical for asset managers using ESG scores for portfolio selection.
Blockchain Technology in Financial Accounting: Enhancing Transparency, Security, and ESG Reporting
Blockchain technology can enhance ESG reporting transparency and security through its tamper-resistant features, but the study notes this potential remains 'underexplored' and is supported mainly by case studies rather than large-scale evidence.
ESG Maturity: A Software Framework for the Challenges of ESG Data in Investment
A review of major ESG frameworks found they lack transparency, reliability, and consistency, with a particular neglect of the 'social' dimension; the proposed 'ESG Maturity' software aims to address these gaps by providing tailored, sector-specific reports.