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As ESG-focused strategies continue to attract investors, there is an interest in establishing frameworks that can help companies meet specific environmental, social, and governance criteria — the better to help investors evaluate company performance in light of ESG standards.
ESG frameworks are important because they can allow market participants to reference a common set of guidelines when evaluating companies for investment purposes. In theory, consistent ESG frameworks could help encourage more efficient and transparent markets.
Although there are a number of ESG frameworks in use, the ESG sector as a whole still lacks a set of clear-cut criteria that have found universal approval or acceptance. Recently, the Securities and Exchange Commission (SEC) proposed rescinding its own set of climate-related disclosure rules.
Key Points
• ESG frameworks include specific criteria and metrics to help firms assess and disclose their progress toward environmental, social, and governance goals.
• ESG frameworks aim to standardize methodologies that will support transparency and accountability and thereby serve all stakeholders.
• While there are a dozen or more existing ESG frameworks worldwide, most are nonbinding (mandatory guidelines tend to be implemented in local jurisdictions).
• Although the SEC released a set of mandatory disclosure rules in March of 2024, these were put on hold a month later, owing to legal challenges, and the SEC has recently proposed rescinding them entirely.
• In the absence of ESG standards mandated by financial regulators, individual firms are left to select appropriate frameworks and/or develop proprietary disclosures.
What Is an ESG Framework?
ESG frameworks include principles, guidelines, and often metrics to help firms measure and, importantly, report their progress regarding specific environmental, social, and governance standards — which, in turn, helps investors interested in green investing. They cover the following areas:
• Environmental factors may include carbon emissions, sustainable energy use, pollution regulation, climate impact, and more.
• Social factors may include a company’s involvement and support of local community issues and worker safety, as well as diversity, equity, and inclusion in the workforce.
• Governance factors may include a company’s leadership selection process, accounting practices, data privacy, and transparency in reporting.
ESG frameworks are an attempt to standardize both methodologies and metrics employed in ESG disclosures to better serve all stakeholders.
The State of ESG Frameworks
Although there are numerous organizations (including policy groups and regulatory agencies) that have developed frameworks for ESG reporting in recent years, there has yet to be a single set of standards to ensure that companies are held accountable for managing certain risk factors and that investors are afforded some reliability in terms of their ESG investment choices.
While the SEC approved a set of ESG disclosure rules in March 2024, a month later, owing to legal challenges, these rules were put on hold. In 2025, the SEC stopped defending the rules in court, and in 2026, it proposed rescinding them entirely.
While the U.S. currently lacks a comprehensive federal ESG reporting framework, companies may still face state-level, international, and industry-specific disclosure requirements. Nevertheless, the question of which ESG framework to adopt is often left up to the individual firm, provided it complies with any applicable reporting obligations.
Likewise, the lack of agreed-upon ESG frameworks means that investors must shoulder the responsibility for understanding which standards and/or metrics a company may be following, and whether this meets their own standards for investment.
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What Is the Goal of an ESG Framework?
ESG frameworks give companies a way to define key principles, standards, and goals in each area (i.e., pertaining to the environment, societal factors, and corporate governance) in order to facilitate accurate ESG reporting. These frameworks may include metrics to measure progress toward specific goals.
Thus, ESG frameworks serve three main purposes:
1. To provide guidelines for companies in terms of their operations and outcomes
2. To establish consistent reporting standards that make it easier for investors to evaluate companies
3. To help governments track regulatory compliance and identify areas for improvement or disciplinary action
ESG Frameworks and Risk
In addition to helping support positive ESG outcomes, companies that adhere to an ESG framework may also be able to mitigate certain ESG risk factors that can impact company performance over the long term.
For example: Reducing the demand for fossil fuels as part of product manufacturing can be beneficial for the environment, and it may also help protect a company from price shocks from oil or gas shortages — which can help its bottom line.
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Benefits of Using an ESG Framework
To the extent that an ESG reporting framework can act as a blueprint for progress in specific areas, it may be more likely that organizations that embrace a certain framework are able to drive more positive outcomes in desired areas. In that light, an ESG framework can enable companies to expand the scope of their business reporting to a wider universe of stakeholders.
Potential benefits include:
• From an environmental perspective, using ESG to guide corporate actions can mitigate the chance of government oversight. It may also reduce a firm’s overreliance on natural resources and help to limit insurance and legal costs if environmental safety guidelines are followed.
• From a social perspective, ESG-influenced policies can improve working conditions and employee retention, reduce the likelihood of labor disputes that can impact productivity, build community support, and improve a firm’s image.
• When it comes to governance, ESG policies can improve transparency at all levels of a firm, protect data privacy, reduce fraud, and potentially reduce operational costs through the better alignment of all stakeholders within a firm.
Large financial institutions, such as public pension funds, have started incorporating ESG criteria into their investment selections, although support for ESG investing varies among policymakers and market participants. In addition, there are now ESG-focused exchange-traded funds (ETFs) and mutual funds being offered by mutual fund companies, online investing platforms, and brokerage firms.
Types and Examples of ESG Frameworks
In the last 20 years or so, over a dozen ESG frameworks have been established. And while some methods may overlap with each other, and in the last few years, some have been consolidated, the existing frameworks each provide a separate set of standards, metrics, and reporting requirements that organizations can consider.
Despite the confusing number of options, some frameworks or disclosure systems seem to be taking the lead in terms of wider adoption, particularly with the expansion of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards.
While some firms have adopted all or parts of these frameworks, others have created proprietary sets of criteria, metrics, and reporting methods that, in some cases, may complement existing frameworks.
The following is a brief summary of some prominent ESG frameworks.
Global Reporting Initiative (GRI)
The Global Reporting Initiative, established in 1997, is an independent organization that helps companies and governments assess and report their impact on ESG issues such as climate change, human rights, and corruption. Although the GRI standards are voluntary, companies representing 62% of global market capitalization use them for reporting, making the GRI standards the most widely adopted framework.
International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards
The IFRS establishes corporate accounting standards and policies overseas — it’s the equivalent of the U.S. Generally Accepted Accounting Principles (US GAAP). Because a growing number of companies need a way to incorporate sustainability into their accounting and reporting disclosures, the IFRS Foundation set up the International Sustainability Standards Board (ISSB) in 2021.
The ISSB disclosure standards are voluntary and build on previous frameworks, a few of which have since been folded into the working IFRS Sustainability Disclosure Standards, including the Task Force for Climate-Related Financial Disclosures (TCFD), the Climate Disclosure Standards Board (CDSB), and others.
Sustainability Accounting Standards Board (SASB) Standards
The SASB Standards were established in 2018 to enable the disclosure of sustainability-related information that would be considered financially material. The framework detailed key ESG issues across 77 different industries. These standards were absorbed by the IFRS Foundation in 2022, and as such are now overseen by the ISSB, which maintains the SASB Standards for organizations that prefer this method.
CDP
The CDP (formerly the Carbon Disclosure Project) is an international nonprofit that helps not only companies but also state and local governments to evaluate and disclose key environmental impacts such as carbon and greenhouse gas emissions, water quality protection, and deforestation on a voluntary basis.
Companies are given a score in separate areas. The questionnaires have been modified to align with the IFRS climate disclosure requirements (above) and continue to evolve. According to the CDP, over 22,000 companies around the world rely on the CDP disclosure framework.
United Nations Global Compact
The U.N. Global Compact is considered one of the world’s largest corporate sustainability initiatives. It is principle-based in that this U.N. pact is nonbinding and offers 10 voluntary principles that organizations can use to establish or enhance policies based on human rights, labor practices, the environment, and anti-corruption measures. These 10 Principles are aligned with the 17 Sustainable Development Goals (SDGs), which continue to serve as global guidelines and voluntary frameworks for greater corporate accountability.
The Takeaway
For investors who are exploring ways to invest sustainably or invest in companies committed to ESG goals, it can be helpful to understand the landscape of ESG standards and reporting frameworks. While there are a number of existing ESG frameworks, a handful have been more widely adopted, which can be useful for ESG-focused investors to know.
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FAQ
What is an ESG framework?
An ESG framework is a set of guidelines that helps companies measure and report their environmental, social, and governance efforts. These frameworks can make it easier for investors to compare companies and understand how they measure performance in areas such as climate impact, employee relations, and corporate oversight.
Why are there different ESG frameworks?
There is no single environmental, social, and governance (ESG) framework that every company must use, so organizations can choose from several reporting standards. While many frameworks cover similar topics, they may use different metrics or reporting methods, which can make it important for investors to understand which framework a company follows.
Which ESG frameworks are the most widely used?
The most widely used environmental, social, and governance (ESG) frameworks include the Global Reporting Initiative (GRI), the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards, the Sustainability Accounting Standards Board (SASB) standards, and the Carbon Disclosure Project. These frameworks provide guidance on reporting sustainability-related information and are used by thousands of companies worldwide.
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