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ESG Risk Ratings

Empower your investment decisions with a consistent approach to assess material ESG risks

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Understanding the depth of exposure and management of material ESG issues within your portfolio is crucial for making informed investment decisions.

Morningstar Sustainalytics' ESG Risk Ratings provides a multi-dimensional assessment of a company's exposure to industry-specific material ESG risks and its management of those risks. Our transparent methodology categorizes risks into five severity levels, offering an absolute measure of risk.

About ESG Risk Ratings

What are the ESG Risk Ratings?

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Learn more about ESG Risk Ratings

How do the ESG Risk Ratings work?

ESG RR methodology brochure

Learn more about our methodology

What are Material ESG Issues?

Morningstar Sustainalytics is a trusted and reliable choice for investors who are looking for a streamlined methodology in assessing financially material ESG issues.

About Our Framework

 Initiating with a comprehensive evaluation, we determine exposure to each material ESG issue at the subindustry level, providing a holistic view of potential risks.
Assessing the landscape, we identify portions of a company's risk that can be effectively managed through dedicated ESG programs and policies, ensuring proactive risk mitigation.
Acknowledging industry-specific challenges, we recognize and factor out elements of risk that are inherently unmanageable for certain companies. For instance, an oil company's challenges related to carbon emissions are considered separately.
Evaluating the controllable segment of risk, a company's performance is reflected through its policies, programs, practices, and quantitative performance measures, providing a clear understanding of risk management efficacy.
The management gap sheds light on areas of risk that remain unmanaged. Controversies impact the company's management score, acting as indicators of potential shortcomings in existing programs and policies.
Culminating the assessment, a company's ESG Risk Ratings is calculated by aggregating the unmanaged risk for each material ESG issue, providing a comprehensive overview of its ESG risk profile.
Ready for Informed Decisions?
ESG Risk ratings framework - total exposure
Ready for Informed Decisions?

Key Features

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Two-Dimensional Materiality Framework

Measures exposure and management of over 20 industry-specific material risks, supported by over 200 indicators and over 1,800 data points.
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Extensive Coverage

Our research universe, based on analyst assessments, covers over 16,000 companies across public equity, fixed income, and private sectors.
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Three Central Building Blocks

Material ESG Issues, Corporate and Stakeholder Governance, Systemic ESG Issues and Idiosyncratic Issues form the core of our research and ratings.
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Flexible Accessibility

Available through Global Access, Datafeeds, API, and third-party distribution platforms.
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Five Risk Levels

Categorized from negligible to severe, providing a clear understanding of potential impact.
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AI in our information value chain

Morningstar Sustainalytics integrates AI efficiency with human insights in news monitoring, ensuring comprehensive and accurate ESG analysis.
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Absolute Measure of Risk

Allows for easy peer and subindustry comparisons, simplifying portfolio-level aggregation.

Looking for underlying ESG data to strengthen your ESG processes?

Use Cases

ESG Risk Ratings meticulously assesses significant Environmental, Social, and Governance (ESG) risks, offering extensive coverage of large and mid-cap companies across equity and fixed income strategies. Morningstar Sustainalytics research serves a wide array of purposes for asset managers, asset owners and banks.

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Strategy Definition invisible text for height

  • Establish a clear ESG policy for organization-wide integration.
  • Gain key insights for manager selection and evaluation.
  • Align investments with client values for sustainable portfolios.
  • Integrate ESG into decision-making to manage risks effectively.
  • Access insights for thought leadership on material ESG issues.

Investment Selection and Construction

  • Integrate ESG criteria into asset allocation, considering impact and governance.
  • Construct portfolios with strong ESG performers, using ratings or specific ESG issues.
  • Incorporate multi-dimensional ESG risk scores into valuation models.
  • Maintain sector weights through best-in-class tilting.
  • Identify ESG leaders and laggards for engagement prioritization.
  • Utilize historical data for back testing support.
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Portfolio Monitoring and Reporting invisible text

  • Utilize ESG Risk Ratings for portfolio-level manager evaluation across asset classes. Morningstar Sustainability ratings support fund comparison.
  • Conduct ESG scenario analysis -- identify potential impacts and prepare for future risks and opportunities.
  • Analyze sustainability factors' impact on performance and share ESG insights with beneficiaries.
  • Customize ESG reporting to meet stakeholders' needs.
  • Benchmark and compare ESG performance against industry standards globally.
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Active Ownership invisible text for

  • Prioritize engagement based on company ESG performance.
  • Engage on specific ESG issues using ESG Risk Ratings.
  • Use ESG Risk Ratings for informed proxy voting decisions.
  • Set ESG targets by benchmarking against peers.
  • Enhance transparency in engagement and voting practices.
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Regulatory and After-Sale Reporting

  • Ensure alignment with ESG regulatory frameworks.
  • Disclose ESG practices using ESG Risk Ratings.
  • Provide stakeholders with transparent ESG information.
  • Monitor compliance and address gaps over time.
  • Leverage our Score Change Log to understand score changes over time.

Report Insights

Company ratings are categorized across five risk levels: negligible, low, medium, high, and severe and represented by our ESG Globes icons.

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

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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.

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

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

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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
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Access company ratings and comprehensive ESG Risk Insights

Unlock the potential of ESG investing with our in-depth reports. Gain valuable perspectives on ESG risk distribution across regions, sectors, and company sizes, understand the key factors influencing ESG risk in global markets, and explore the implications for portfolio construction. This series, in partnership with Natixis, provides essential guidance for aligning investment strategies with ESG standards.

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ESG Risk Ratings:
A 360° Review invisible text for height

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ESG Risk Ratings:
Distilling for Enhanced Performance and Downside...

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ESG Risk Premium: 
A Further Look at Style, Industry and Country Factors.

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Company ESG Risk Ratings:
See ESG Risk Ratings for every company in our portfolio.

Why Sustainalytics?

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A Single Market Standard

Consistent approach to ESG assessments across the investment spectrum.

Award-Winning Research and Data

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

End-to-End ESG Solutions

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

30 Years of ESG Expertise

800+ ESG research analysts across our global offices.

A Leading SPO Provider

As recognized by Environmental Finance and the Climate Bonds Initiative.