["Mathematical Finance, EarlyView. ", "\nABSTRACT\nEnvironmental, social, and governance (ESG) ratings are pivotal in sustainable investing, informing portfolio construction and regulatory compliance. We develop a game‐theoretic principal–agent model involving ESG‐conscious investors and competing rating agencies. Investors impose ESG‐related portfolio constraints by selecting ratings from different agencies, while agencies strategically issue ESG ratings based on a trade‐off between financial incentives related to market share and reputational risks from deviating from ESG fundamentals. The interaction forms an extensive‐form game with imperfect information, and we characterize its Stackelberg stable equilibrium. Our analysis shows that (1) agencies may strategically deviate ESG ratings from fundamentals under certain conditions, and such deviations tend to align ratings with asset returns when investors have strong green preferences; (2) asymmetric aversion for deviation generate rating disagreement between multiple agencies even when they have access to the same ESG fundamentals, potentially allowing one agency to monopolize green investors; (3) the magnitude of rating deviation governs a trade‐off between investors' pecuniary utility and portfolio's fundamental greenness; and (4) firm‐level greenwashing exacerbates rating deviation and further distorts the trade‐off between utility and greenness. These results rationalize several empirical findings in the ESG literature and provide insights into designing mechanisms that encourage more informative ESG ratings."]