Corporate climate scores, carbon emissions, and investment in decarbonisation in the steel industry. What do ratings tell us?

Steel production is a critical economic activity and amongst the largest industrial consumers of energy. The industry faces a complex and costly task to decarbonise in line with global climate targets. This paper evaluates the performance of environmental and emissions scores within leading Environmental, Social and Governance (ESG) ratings products in capturing carbon emissions outcomes and investment in low-carbon production amongst major steel producers. We assess data for 75 steel producers, representing 65% of global production. We find no strong evidence that environmental or emissions scores reflect either levels of, or changes in, firms’ total greenhouse gas emissions or emissions intensity in the period 2013–2022. Overall, ‘good’ scores are not explained by available emissions or investment data. These findings for a critical industry emphasise the need for methodological transparency from all ratings providers, more research into ratings’ performance in reflecting outcomes and investments, and further policies to enhance disclosures from firms and rating agencies. • We analyse climate-related scores for steel producers from major ESG rating agencies. • Scores do not reflect firm’ carbon emissions data or firms’ green steel projects. • Environmental and emissions scores for steel firms diverge across providers. • Raters must explain how climate-related scores relate to emissions and investment.