ESG Risk Ratings

A consistent approach to assess material ESG risk

ESG Risk Rating

Knowing how exposed and how well your portfolio companies manage their material ESG issues is now a critical part of making well-informed investment decisions.

That's why the world's leading investors rely on our ESG research and ratings for a consistent approach to evaluate financially material ESG issues that affect the long-term performance of their investments.

Learn more about why Sustainalytics’ ESG Research and Ratings are the industry standard.

Overview of Sustainalytics’ ESG Risk Ratings

Sustainalytics’ ESG Risk Ratings measure a company’s exposure to industry-specific material ESG risks and how well a company is managing those risks. This multi-dimensional way of measuring ESG risk combines the concepts of management and exposure to arrive at an absolute assessment of ESG risk. We identify five categories of ESG risk severity that could impact a company’s enterprise value

Risk rating

The Rigor and Comprehensiveness that the World’s Leading Investors Count On

Measure of ESG Risk

Absolute Measure of ESG Risk

A sophisticated methodology for rating absolute ESG risk, while enabling best-in-class analysis. Company ratings are comparable across peers and subindustries and allow for easy aggregation at the portfolio level.

Exposure factors

Multiple Exposure Factors

Deep insights from multiple exposure factors, including business model, financial strength, geography and incident history.

Corporate governance

Integrated Corporate Governance Information

Fully integrated, comprehensive corporate governance research and ratings.

Transparency

Transparent Methodology

Transparent methodology with multiple levels of data and qualitative insights to provide clients with custom ESG solutions.

Framework

Two-Dimensional Materiality Framework

Two-dimensional materiality framework measures a company’s exposure to industry-specific material risks and how well a company is managing those risks.

Building blocks

Three Central Building Blocks

Corporate governance, material ESG issues, and idiosyncratic issues (black swans) form the three central building blocks of our ESG research and ratings.

Risk levels

Five Risk Levels

The ESG Risk Ratings are categorized across five risk levels: negligible (0-10), low (10-20), medium (20-30), high (30-40) and severe (40+).

Companies

13,000+ Companies Covered

Sustainalytics' ESG Research and Ratings span more than 13,000 companies and encompass most major global indices.

Material ESG issues

20 Material ESG Issues

The ratings framework is supported by 20 material ESG issues that are underpinned by more than 300 indicators and 1,300 data points.

Accessibility

Flexible Accessibility

The ESG Risk Ratings are available through Global Access, Datafeeds and API as well as several third-party distribution platforms.

Human Insights Supported by AI Efficiency

ai

Daily News Monitoring

AI-powered Digital Content Curation
Research analysts leverage smart technologies to enable them to monitor more than 60,000 media sources, and up to one million news articles daily.

cycle

Robust Annual Update Cycle

  • Company profiles updated annually with corporate reporting cycle
  • Alternative data sources, like regulatory filings on product recalls and NGO sources, augment self-reported corporate data
  • Analysis by a team of over 350 ESG research analysts supported by artificial intelligence powered descriptive and predictive analytic capabilities
  • Robust quality control mechanisms with peer reviews by senior analysts and company feedback mechanisms

About Our Framework

We start with exposure, where exposure to each material ESG issue is initially determined at the subindustry level.
Next, we consider what part of the company’s risk can effectively be managed through ESG programs and policies.
For some companies, a portion of its risk may be considered unmanageable. For example, an oil company is not able to fully eliminate all its risks related to carbon emissions so that is factored out of the calculation.
For the portion of risk that is manageable, a company’s performance is reflected by its policies, programs, practices and quantitative performance measures.
The management gap reflects the risk that is not managed. In addition, controversies have a discounting effect on the company’s management score as they demonstrate shortcomings in the company’s programs and policies.
Overall a company’s ESG Risk Rating is calculated by adding the amount of unmanaged risk for each material ESG issue.

Investor Use Cases 

ESG Integration – Financials

ESG Integration

Multi-dimensional ESG risk scores can be incorporated into equity or bond valuation models and aggregated at the portfolio-level.

Best-in-Class Investment Analysis icon

Best-in-Class Investment Analysis

Comparable company scores support flexible applications for best-in-class analysis, including subindustry, sector or regional approaches.

benchmark

Screening and Benchmarking

Overall Risk Ratings and material ESG issue scores support risk-based ESG screens and enable robust benchmarking across and within sectors and subindustries.

Thematic Investing icon

Thematic Investing

Scores on material ESG issues support thematic investment themes and provide meaningful new input for fund and index creation.

Engagement and Voting

Engagement and Voting

Material ESG issue framework effectively supports engagement with companies on priority ESG issues and informs voting decisions on E&S shareholder resolutions.

reporting

Reporting & Promotion

Communicate sustainability performance and commitment through ESG reporting and leverage the Morningstar Sustainability RatingTM for funds for marketing purposes.

Report Insights

Company ratings are categorized across five risk levels: negligible, low, medium, high and severe.

report 1

A company’s risk is measured against its industry peers and against the global universe.

report 2

Qualitative analysis, underpinned by analyst insights and quantitative data, describes the reasons why a company is exposed to specific material ESG issues and explains how well a company is managing these issues.

report 3

Material ESG Issues (MEIs) are identified and brought into focus.

report 4

Transparency into company events that may impact a company’s operations, stakeholders or the environment.

report 5

The magnitude to which a company is exposed to ESG risk and how well the company is managing that risk is measured and explained.

report 6
Report page 1

Why Sustainalytics?

Market standard

A Single Market Standard

Consistent approach to ESG assessments across the investment spectrum.

Award winning

Award-Winning Research and Data

Firm recognized as Best ESG Research and Data Provider by Environmental Finance and Investment Week.

End to end

End-to-End ESG Solutions

ESG products and services that serve the entire investment value chain.

Expertise

25+ Years ESG Expertise

350+ ESG research analysts across our global offices.

Largest second party opinion provider

Largest Second-Party Opinion Provider

As recognized by Environmental Finance and the Climate Bonds Initiative.

Related Insights and Resources

trees in forest
Why Deforestation Matters for Investors

EARTH DAY 2021: Why should investors care about deforestation and how can it can be taken into account within an investment portfolio?

trees in forest
Climate Risk Management: Investing Toward Net Zero

Watch our video to learn how applying Sustainalytics-driven carbon metrics to Morningstar indexes can facilitate a nuanced approach to portfolio decarbonization, with encouraging investment attributes.

rainforest biodiversity
Deforestation and Biodiversity Loss Highlight the need for a Better Normal

The world is aching for a return to normality after a year (and still counting) of news bulletins being dominated by the COVID-19 pandemic; Earth Day 2021 should serve as a stark reminder that we cannot go back to business-as-usual. We must address the vast environmental challenges facing humanity, such as climate change, loss of biodiversity, extreme weather and issues related to water.

sustainable forests and finance
Climate Change – Sustainable Forests and Finance | Webinar

Listen in as Sustainalytics’ Engagement Manager, Henry Pallister-Dixon, sits down with Beatrice Crona from the Royal Swedish Academy of Science and the Stockholm Resilience Center at Stockholm University to discuss:

Related Products

Climate Solutions

Leverage our carbon research to align your portfolio to the future low-carbon economy.

Learn More

Thematic Engagement

Engage on the most challenging ESG issues, from climate change to human capital.

Learn More

Impact Solutions

Measure, manage and report on the social and environmental impact of your portfolio.

Learn More