ESG Ratings & Research

Integrate our company-level ESG ratings and analyses into key investment processes

Overview
Sustainalytics’ ESG Risk Ratings, our next generation ESG ratings, are designed to help investors identify and understand financially material ESG risks at the security and portfolio level.

 

INFORMATION FOR CORPORATE ISSUERS

WHITE PAPER SUMMARY

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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.

ESG Ratings Elements

Comprised of three central building blocks: corporate governance, material ESG issues, and idiosyncratic issues (black swans).

ESG Ratings Categories

ESG 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.

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ESG ratings coverage will span 9,000 companies at market launch, and expand to 11,000 companies in Q2 2019.

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Nearly 40 industry-specific indicators give investors a stronger signal into company performance.

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Sustainalytics’ ESG ratings and accompanying research are available through Global Access, Datafeeds and API.

1

Financial Materiality Framework

Assessment focuses on ESG issues presenting the most material risks to company performance.

2

Two-Dimensional Lens

Exposure lens informs investors what material ESG risks the company faces and the management lens assesses how well the company is managing these risks.

3

Multiple Exposure Factors

The level of exposure is based on factors such as the business model, financial strength, geography and controversies.

4

Comparability

Absolute ratings enable comparability across industries and companies at both the overall ESG and issue-specific risk levels.

5

Solid Foundation

Corporate governance ratings are fully integrated into the ESG Risk Ratings as the baseline for all companies.

6

Stronger Signal

Enhanced Analyst Views and Issue Narratives offer insights into specific areas of corporate risk.

7

Rigorous Controversy Research

Discounting effect on management scores increases with event severity, giving controversies a higher impact on the rating.

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Measures companies’ exposure to and management of material ESG risks

Exposure dimension of our ESG Risk Rating makes it forward-looking.

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Rates absolute ESG Risk, while allowing for relative, best-in-class analysis

ESG risks can be compared across subindustries, sectors, companies and regions.

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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.

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Rigorous controversy research identifies and evaluates relevant material ESG issues

Discounting effect applied to management scores increases with event severity.

Depiction of exposure and risk captured by ESG ratings
1
We start with exposure, where exposure to each material ESG issue is initially determined at the subindustry level.
2
Next, we look at the management dimension, which measures how well the company is mitigating its exposure.
3
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.
4
For the portion of risk that is manageable, a company’s performance is reflected by its policies, programs, practices and quantitative performance measures.
5
Controversies have a discounting effect on the company’s management score, as they show that the company’s programs and policies have not been completely effective and could lead to increasing risk.
6
Overall a company’s ESG Risk Rating is calculated by adding the amount of unmanaged risk for each material ESG issue.
Sample Sustainalytics ESG ratings report
A. Company ratings are categorized across five risk levels: negligible, low, medium, high and severe.
B. A company’s risk is measured against its industry peers and against the global universe.
C. Companies are exposed to different ESG issues to different degrees. Exposure assessment is driven by sub-industry and company-specific factors
D. The magnitude to which a company is exposed to ESG and how well the company is managing that risk is measured and explained.
E. Material ESG Issues (MEIs) are identified and brought into focus.
F. The magnitude to which a company is exposed to ESG and how well the company is managing that risk is measured and explained
Second Sample Sustainalytics ESG ratings report
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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 sub-industry, 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 sub-industries.

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Thematic Investing

Material ESG issues scores support thematic investment themes and provide meaningful new input for fund or 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.

DELIVERY OPTIONS

Global Access
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Access our research through our user-friendly investor interface with easy to use screening and reporting tools

Data Services
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Access our ESG ratings and research through an internal or a third-party system of your choice Bloomberg, Factset and Markit

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