Sustainalytics’ ESG Risk Ratings, our next generation ESG research and ratings, are designed to help investors identify and understand financially material ESG risks at the security and portfolio level.
Based on a two-dimensional materiality framework that measures a company’s exposure to industry-specific material risks and how well a company is managing those risks.
Comprised of three central building blocks: corporate governance, material ESG issues, and idiosyncratic issues (black swans).
Ratings are categorized across five risk levels: negligible, low, medium, high and severe. Ratings scale is from 0-100, with 100 being the most severe.
Ratings coverage will span 9,000 companies at market launch, and expand to 11,000 companies in Q2 2019.9
Nearly 40 industry-specific indicators give investors a stronger signal into company performance.
Financial Materiality Framework
Assessment focuses on ESG issues presenting the most material risks to company performance.
Exposure lens informs investors what material ESG risks the company faces and the management lens assesses how well the company is managing these risks.
Multiple Exposure Factors
The level of exposure is based on factors such as the business model, financial strength, geography and controversies.
Absolute ratings enable comparability across industries and companies at both the overall ESG and issue-specific risk levels.
Corporate governance ratings are fully integrated into the ESG Risk Ratings as the baseline for all companies.
Enhanced Analyst Views and Issue Narratives offer insights into specific areas of corporate risk.
Rigorous Controversy Research
Discounting effect on management scores increases with event severity, giving controversies a higher impact on the rating.
Measures companies’ exposure to and management of material ESG risks
Exposure dimension of our ESG Risk Rating makes it forward-looking.
Rates absolute ESG Risk, while allowing for relative, best-in-class analysis
ESG risks can be compared across subindustries, sectors, companies and regions.
Focus on material ESG issues informs what companies are doing or not doing to manage risks effectively
Level of exposure for each company is based on multiple exposure factors.
Rigorous controversy research identifies and evaluates relevant material ESG issues
Discounting effect applied to management scores increases with event severity.