Template-Type: ReDIF-Article 1.0

Author-Name: Karoly Gasteiger
Author-Workplace-Name: University of Pecs
Author-Email: gasteiger.karoly@ktk.pte.hu
Author-Person:

Title: ESG Ratings and Financial Markets: Evidence, Measurement Noise and Misinterpretations

Abstract: This essay examines the measurement limitations that arise when ESG ratings
are interpreted as financial information. It argues that composite ESG scores
should not be treated as stable risk factors, but rather as information signals
shaped by provider-specific methodologies, data sources, disclosure practices and
aggregation choices. This essay discusses the separation between disclosure and
actual ESG outcomes, the model risk created by rating divergence, and the frequent
misinterpretation of the green premium and ESG performance. From a banking
perspective, the implication is not to discard ESG information, but rather to use
external ESG data with discipline. Without financial materiality, data quality
controls, exposure-based assessments and internal governance, ESG cannot serve
as a defensible input in financial decision-making.

Classification-JEL: G12, G14, G21, Q56
Keywords: ESG ratings, financial markets, measurement error, rating divergence, information noise, prudential risk management
Pages: 159-177
Volume: 25
Issue: 2
Year: 2026
File-URL: https://hitelintezetiszemle.mnb.hu/sw/static/file/fer-25-2-e1-gasteiger.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:finrev:v:25:y:2026:i:2:p:159-177