ESG Risk Ratings

A consistent approach to assess material ESG risk

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

That is 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.

NEW! Covering more than 16,000 companies, Morningstar Sustainalytics has the widest coverage of analyst-based ESG Risk Ratings in the market. The newly expanded universe includes public and private companies, fixed-income issuers and listed Chinese companies and allows investors to support diversified investment strategies.

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

ESG Risk Ratings: Introducing the New Expanded Global ESG Universe

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 scale

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

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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.

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Global ESG Universe

New Global ESG Universe has the widest coverage of analyst-based ESG Risk Ratings in the market and covers over 16,000 issuers. The expanded universe includes public companies, private companies, and fixed-income issuers across developed, emerging and frontier markets. Also, the universe has enhanced coverage of Chinese companies listing A and/or B shares.

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Integrated Corporate Governance Information

Fully integrated, comprehensive corporate governance research and ratings.

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Transparent Methodology

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

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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.

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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.

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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+).

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16,000+ Companies Covered

Sustainalytics' ESG Research and Ratings span more than 16,000 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

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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.

annual update 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 800 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 

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ESG Integration

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

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Best-in-Class Investment Analysis

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

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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.

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Thematic Investing

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

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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.

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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 and represented by our ESG Globes icons.

ESG Risk ratings report showcasing company rating

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

ESG Risk ratings report showcasing company risk

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.

ESG Risk ratings report showcasing company analysis

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

ESG Risk ratings report showcasing material ESG issues

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

ESG Risk ratings report showcasing company events

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

ESG Risk ratings report showcasing ESG risk decomposition
ESG Risk ratings report showcasing company rating

Why Sustainalytics?

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A Single Market Standard

Consistent approach to ESG assessments across the investment spectrum.

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Award-Winning Research and Data

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

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End-to-End ESG Solutions

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

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30 Years of ESG Expertise

800+ ESG research analysts across our global offices.

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A Leading SPO Provider

As recognized by Environmental Finance and the Climate Bonds Initiative.

Climate Solutions

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

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Material Risk Engagement

Engage on the most material ESG risks identified by the ESG Risk Ratings.

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Impact Solutions

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

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Morningstar® Global Market SustainabilitySM Index Family

Best-in-class equity index that features reduced ESG risk profile​ with low to moderate tracking error.

Morningstar® Sustainability Dividend Yield FocusSM Index Family

High Income generating equity investments focused on total returns with reduced ESG Risk.

Morningstar® Global Corporate Bond Sustainability IndexesSM

Diversified corporate bond portfolio that avoids bonds with high ESG risk relative to their sector peers.

Morningstar® Sustainability Moat IndexesSM

Exposure to companies that have distinct competitive advantages as well as low ESG Risk.

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