Hello my name is Wilco Van Heteren and I'm an executive director of ESG research at
Sustainalytics. The current Covid-19 pandemic has shined an intense spotlight on the importance of
taking ESG issues into account as a part of making more informed investment decisions
and Material ESG issues are at the heart of Sustainalytics ESG Risk Ratings as we assess
companies on them. We consider an ESG issue to be material within our rating if it's likely to
have a significant effect on the enterprise value of a company. Sustainalytics believes
assessing companies on material ESG issues is critical given the importance of focusing on areas
that have the most potential to endanger enterprise value. Academic studies have identified
that companies that focus on material ESG issues are more likely to outperform the market.
We recognize companies have different levels of exposure to various issues and we understand for
investors it is vital to understand what specific issues are driving exposure and how a company is
managing those specific issues. Our 20 Material ESG Issues can be considered as individual units
of risk, that can then be consolidated to give you a holistic picture of company level ESG risks.
To give you some background on how this works in practice we first determine which material
ESG issues are relevant for each sub-industry. For each sub-industry we then assess a company's
exposure to the issue and how well a company is managing an issue. Then this rolls up into the
amount of ESG risk on a specific material ESG issue that a company leaves unmanaged.
Although they contribute to the overall rating, Sustainalytics material ESG issues can also have
value as standalone assessments. They contribute to understanding which risks are not manageable
and investors can perform comparisons on an issue across companies and sectors and gain insight on
the frequency of controversies on an issue, just to name a few examples. In the coming months we
will examine the significance of specific material ESG issues given current market conditions,
the frequency of issues across industries and spotlights industries and companies to highlight
the risk and opportunities that Material ESG Issues pose to companies. We look forward
to showing you how we can help you unravel the dimensions of ESG risks.