Emphasizing the moderating function of market information efficiency, this paper investigates the effect of ESG (Environmental, Social, and Governance) rating disagreements on institutional investor behavior. We find, using a strong methodology (2SLS and GMM) and a dataset of Chinese listed companies (2015–2024), ESG rating differences notably lower institutional holdings, especially in social and environmental aspects. By reducing uncertainty, market efficiency helps to offset these impacts and emphasizes the need of fast and open information distribution. Although ESG factors may or may not influence the decisions made by institutional investors, our results demonstrate that for those that give sustainability top priority in their investment plans, ESG rating differences provide major difficulties. We also underline how Big Data and artificial intelligence may improve ESG insights, so providing useful consequences for legislators and investors to unify ESG rules and improve sustainable investing methods.