Low Carbon Transition Rating
ESG Risk Ratings
Frequently Asked Questions for Companies
About Sustainalytics’ ESG Risk Ratings
Sustainalytics’ ESG Risk Ratings are based on a two-dimensional materiality framework that measures a company’s exposure to industry-specific material ESG risks and how well a company is managing those ESG Risks. Sustainalytics ESG Risk Ratings places companies into five risk categories:
- Negligible
- Low
- Medium
- High
- Severe
These risk categories are absolute, i.e., comparable across sectors.
A company’s ESG Risk Rating score is assigned to one of five risk categories:
- Negligible Risk (Overall Score of 0-9.99 points): Enterprise value is considered to have a negligible risk of material financial impacts driven by ESG factors
- Low Risk (10-19.99 points): Enterprise value is considered to have a low risk of material financial impacts driven by ESG factors
- Medium Risk (20-29.99 points): Enterprise value is considered to have a medium risk of material financial impacts driven by ESG factors.
- High Risk (30-39.99 points): Enterprise value is considered to have a high risk of material financial impacts driven by ESG factors
- Severe Risk (40 and higher points): Enterprise value is considered to have a severe risk of material financial impacts driven by ESG factors
Comprehensive Ratings Framework
- Companies covered by the Comprehensive Ratings Framework are primarily large- and medium-cap companies.
- The Comprehensive Framework assesses between 70-90 management indicators per issuer.
- These indicators are selected by relevance both to the assigned peer group (a subindustry in Sustainalytics’ industrial classification system) and to the particularities of a company’s business model.
- In the Comprehensive Ratings Framework, the overall Risk Rating score is the summation of the scores on 3 to 10 material ESG issue risk ratings scores.
Core Ratings Framework
- Companies covered by the Core Ratings Framework are primarily small-cap companies.
- The Core Ratings Framework assesses between 20-30 management indicators per issuer.
- Core Ratings Framework management indicators are chosen for their predictive ability to signal an issuer’s performance on managing key ESG issues. By evaluating a select set of indicators, we can provide a high-level assessment of a company’s overall management of ESG risks that is directly comparable to assessments of similar companies within the Comprehensive Ratings Framework.
- In the Core Ratings Framework, the overall Risk Rating score is NOT derived from separate MEIs risk rating scores but calculated at the company level.
ESG Risk Ratings Methodology
Exposure to ESG Risk is determined by a set of ESG-related risk factors that pose potential financial risks for companies. Very low exposure to an ESG risk suggests an issue is not material to a company; higher exposure suggests the issue is material.
Management of ESG Risk is determined by Sustainalytics’ assessments of management policy commitments related to an ESG risk, programs designed to implement those policy commitments, the availability of quantitative performance data measuring how well the programs have met stated targets, and how well a company is managing its involvement in related ESG controversies.
MEIs only pertain to the Comprehensive Ratings Framework.
A material ESG issue (MEI) is the core building block of the ESG Risk Rating. For Sustainalytics, an ESG issue is material if it is likely to have a significant effect on the enterprise value of a typical company within a subindustry, and if the presence or absence of an MEI in financial reporting is likely to influence the decisions made by a reasonable investor.
Material ESG issues for each subindustry are selected by Sustainalytics’ Risk Ratings Research Team. All companies assigned by Sustainalytics to a subindustry category are assessed on how well they are managing their exposure to these MEIs.
If a MEI is not relevant to a specific company’s business model, then it may be disabled.
Note that no specific predictions about financial impacts at the company level are implied by the presence or absence of a MEI.
IMPORTANT: The Core Ratings Framework does not employ MEIs. The overall company ESG Risk Rating is calculated according to the overall company exposure and management scores.
MEIs only pertain to the Comprehensive Ratings Framework. (The Core Ratings Framework does not employ MEIs. The overall Management Score is calculated by the weighted sum of the management indicator scores.)
For each MEI, the management score is a weighted sum of the management indicator scores and scored on a 0-100 scale.
Each MEI Management Score measures what percentage of a firm’s manageable risk has been managed.
For example, assuming that all of a company's exposure to risk is manageable, then an MEI management score of 80 for that MEI means the company has managed 80% of its exposure to risk.
An issue beta is a factor that assesses the degree to which a company’s exposure deviates from its subindustry’s exposure on a material ESG issue. It is used to derive a company-specific issue exposure score for a material ESG issue. It ranges from 0 to 2, with 0 indicating no exposure, 1 indicating the subindustry average, and 2 indicating exposure that is twice the subindustry average.
Idiosyncratic Risk is additional exposure to risk caused by an issue that was not deemed material at the subindustry level but becomes a material ESG issue for a company based on the occurrence of a Category 4 or 5 event.
Companies can receive their full ESG Controversy Report upon request. Please notify the Issuer Relations Department: [email protected]
Yes. The six corporate governance pillars found in our Corporate Governance Rating form the baseline of our ESG Risk Rating. These pillars include board and management quality and integrity; board structure; ownership and shareholder rights; remuneration; financial reporting; and stakeholder governance. Our ESG Risk Rating includes a comprehensive view of a company’s governance structures, practices, decision-making and behaviors, and events.
NB: While the scores of the Corporate Governance Rating are fully incorporated into the Comprehensive Ratings Framework, the Core Framework only assesses a limited number of Corporate Governance indicators.
Companies may receive their Corporate Governance Rating Report upon request. Please notify the Issuer Relations Department: [email protected]
Data Validation Process
Research on management indicators is updated annually. ESG Controversy research is updated as events occur. Other elements of the report related to Carbon, Water and other universal indicators are updated annually as well. Structural adjustments to the rating (e.g., selection of material ESG issues, weighting of indicators) are done annually.
Yes. Sustainalytics contacts issuers to review and validate our data as part of our annual full research update of the ESG Risk Rating Report. Issuers are asked to log into our company portal – Sustainalytics' Issuer Gateway – to download and review the Management Indicators Feedback Report.
Issuers should download the Management Indicators Response Template - an Excel spreadsheet - to submit any comments they may have about the Management Indicators Feedback Report.
Sustainalytics sends an alert to issuers assigned to our Comprehensive Ratings Framework to comment on their "Management Indicators Feedback Report" as part of the annual update of the ESG Risk Rating Report. The Management Indicators Feedback Report can be downloaded from Sustainalytics' Issuer Gateway.
Issuers should also download the Management Indicators Response Template - an Excel spreadsheet - to submit any comments they may have on the Management Indicators Feedback Report.
Issuers in our Core universe can access and review their finalized ESG Risk Rating report via the Issuer Gateway. Sustainalytics offers issuers in this universe the ability to comment on their Management Indicators by submitting a "ticket" via the Issuer Gateway. (See section Online Comments on Management Indicators).
Please note, there is no draft review process for companies in the Core Ratings Framework. Please contact [email protected]
We invite you to access our company portal - Sustainalytics' Issuer Gateway - where you will find the following:
- A copy of the Sustainalytics ESG Risk Rating Report.
- FAQ and methodology documents concerning ESG Risk Ratings.
- Annual update schedule and a draft Management Indicators Feedback Report (during annual update cycle –Comprehensive universe only).
- Information on the products and services offered to companies by Sustainalytics Corporate Solutions unit.
To access Sustainalytics' Issuer Gateway, please go to: https://issuergateway.sustainalytics.com/. If you have any questions, please contact Sustainalytics' Issuer Relations Team: [email protected]
Online Scores
The following up-to-date ESG Risk Rating scores in the Research tab/ESG Risk Rating section:
- Overall ESG Risk Rating score and risk category
- Overall ESG Risk Exposure and ESG Risk Management scores and categories
- (Comprehensive Framework only) Material ESG Issue (MEI) definitions, scores and risk categories
- Management Indicator scores
Downloadable Reports
Found in the Research tab/Documents section:
- A copy of the current live version of the Sustainalytics ESG Risk Ratings. The Report, which is refreshed daily, includes a full accounting of the ESG Risk Ratings management indicator scores.
- (Comprehensive Framework only) A Management Indicators Feedback Report for use during the “annual update feedback period” that includes the preliminary findings by your Research Team for the next annual update. Sustainalytics will alert you when this feedback period has begun. If you have any questions, contact [email protected]
Annual Update Schedule
Month/Year of last annual update of the ESG Risk Rating Report. The next annual update will be scheduled for the same month if possible. If you have any questions, please contact [email protected]
Knowledge Hub Resources
FAQ and methodology documents about the ESG Risk Ratings model and research process.
Sustainalytics Corporate Solutions
Information on the products and services offered to companies by Sustainalytics Corporate Solutions unit, including the following:
Complimentary Competitive Intelligence tools
- Competitive Landscape: a complimentary resource that allows you to perform a top-level comparison against peers and view industry rankings.
- Competitive Insights: a fee-based resource that allows you to gain deeper insights into your competitive position.
Licensed Rating Package
- A fee-based resource allowing you to use your ESG Risk Rating for commercial purposes.
Comprehensive Ratings Framework
Issuers are given 10 business days to review the accuracy and completeness of the data collected. If issuers provide feedback within the allotted time frame, then this information is reviewed by the analyst prior to the release of the updated report to Sustainalytics’ clients. Information provided after this deadline will be processed but the timing of the update will be variable. Deadline extensions are also available.
Core Ratings Framework
Issuers may submit comments about the ESG Risk Rating research, including management indicator assessments, at any time.
The optimum times to submit comments are in the preparation period and the immediate post-annual update period. Sustainalytics prefers to receive comments within a month after the annual update has been completed.
For guidance on how to submit comments to us, please see the section Core Framework Companies – Providing Comments Online.
Companies can access these details via our company portal – Sustainalytics' Issuer Gateway – where you will find the following:
Online Scores
The following up-to-date (refreshed daily) ESG Risk Rating scores in the My Company Tab/ESG Risk Rating section:
- Overall ESG Risk Rating score and risk category
- Overall ESG Risk Exposure and ESG Risk Management scores and categories
- (For companies within Sustainalytics' Comprehensive Ratings universe) Material ESG Issue (MEI) definitions, scores and risk categories
- Management Indicator Scores
Downloadable Reports
Found in the My Company Tab/ESG Risk Rating and/or My Documents section:
- A copy of the current live version of the Sustainalytics ESG Risk Ratings Report (refreshed daily) that includes a full accounting of the ESG Risk Ratings management indicator scores.
- Companies within Sustainalytics' Comprehensive Ratings universe can access their Management Indicators Feedback Report for use during the “annual update feedback period” that includes the preliminary findings by your research team for the next annual update. Sustainalytics will alert you when this feedback period has begun. If you have any questions, contact [email protected]
Annual Update Schedule
Month/Year of last Annual update of the ESG Risk Rating Report. The next annual update will be scheduled for the same month if possible. If you have any questions, contact [email protected]
Knowledge Hub Resources
FAQ and methodology documents about the ESG Risk Ratings model and research process.
Sustainalytics Corporate Solutions
Information on the products and services offered to companies by our Sustainalytics Corporate Solutions unit, including Complimentary Competitive Intelligence tools where you can perform a top-level comparison against peers and view industry rankings using Competitive Landscape and gain deeper insights into your competitive position by purchasing access to the Competitive Insights tool.
To access Sustainalytics' Issuer Gateway, please go to: https://issuergateway.sustainalytics.com/
If you have any questions, please contact the Sustainalytics Issuer Relations Team: [email protected]
The following Sustainalytics Reports are available upon request:
- ESG Controversy Report
- Corporate Governance Report (Comprehensive Framework companies only)
- Low Carbon Transition Rating
- Global Standards Screening
If you have any questions, please contact the Sustainalytics Issuer Relations Team: [email protected]
Additional Questions
As of December 2022, Sustainalytics' Risk Ratings universe covers over 16,000 companies. Our research universe is determined by 25-30 major global and regional equity and fixed incomes indices.
Sustainalytics has its own industry classification system that categorizes companies into peer groups. This classification is based on an assessment of business operations, products and services, and takes into account common environmental, social and governance challenges.
As of August 2022, Sustainalytics has created 138 peer groups – “subindustries” – that are placed into 42 distinct “industries”.
Although both scores use a range of 0-100, a lower score in the ESG Risk Rating is better than a higher score, whereas for the ESG Rating a higher score is better than a lower score.
It is important to keep in mind that the scores were designed to capture different dimensions of a company’s ESG performance. The ESG Risk Rating score reflects how much of a company’s exposure to ESG risk is unmanaged. The ESG Rating score reflects how well a company is managing its material ESG issues.
Sustainalytics lists the overall universe, industry (equivalent of peer group in the ESG Rating) and subindustry rankings and percentiles in the ranking section on page one of the ESG Risk Rating Report.
Uploading Documents
Sustainalytics invites companies to upload documents that will provide evidence of key ESG management policies, programmes and/or performance data.
Please note that Sustainalytics collects information related to issuers' ESG Risk Rating; we source this information from company websites or other public sources. If a document is easily found and downloadable from a company website, Sustainalytics likely has this document.
Issuers are encouraged to upload any documents that provide evidence of management practices that are not yet readily available on the company website.
Sustainalytics will continue to accept – and typically prefers - all information shared with us through URLs.
- Relevant documents not readily available on the company website.
- Documents indicating the existence of relevant ESG policies and programs and performance data.
- If you have any questions concerning these types of documents, please contact us via our Chat Box or email: [email protected]
Example of documents Sustainalytics prefers as URLs include:
Do NOT use any special characters in the document title including: [`!@#$%^*_+=[]{};':"\|,<>/?~]
If you have any questions concerning these types of documents, please contact us via our Chat Box or email: [email protected]
Providing Comments Online
The Online Comments system allows all companies we rate to submit comments, via the Issuer Gateway portal, on management indicators after Sustainalytics has completed the annual update and published the research.
If applicable, companies can also use the Online Comments system to submit comments on any controversial events cited within the ESG Risk Rating assessment.
Comments should focus on highlighting any factual error or present a justifiable reason they believe the assessment should be changed.
All comments should be supported by relevant documentation.
Issuers should focus on highlighting any factual error or, if they believe the assessment should be changed, provide details, with a justifiable reason(s) and supporting documentation.
The online feedback option is available to any team member with an Issuer Gateway account. To register for/ log into the Issuer Gateway, click here. Access will only be provided to those with an individual corporate email address. Access will not be provided if using a general departmental email address.
Sign into Sustainalytics' Issuer Gateway.
Select the “Research” tab; Within the ESG Risk Rating section, scroll down the page to Management Indicators.
Select any Management Indicator/s you wish to comment on and click “Add Comment”. Comment on all that apply.
To SUBMIT your SAVED COMMENTS for review, please go to the Communications Log. From there, check that you have commented on all the relevant indicators and then select SUBMIT TICKET to post your comments for review by Sustainalytics' ESG Research team.
IMPORTANT: We encourage you and your team members to comment on as many Management Indicators as you need to. For clarity, however, we encourage you to consolidate your comments FOR EACH Management Indicator and send as one “batched” submission.
Documentation can be submitted in the following ways:
- Add the URL within the “Comment” field.
- Upload a new document to the Document Upload section (“Research/Documents”) and reference the page number in the “Comment” field.
We recommend that you bundle all your comments into one submission. However, you can submit as many comments on your company’s Management Indicators or any controversial events as you need to.
- Once you have submitted your comments, you will immediately receive an acknowledgement from Sustainalytics.
- We will respond to comments depending on the nature of the submission, but we will aim to address your comments as soon as possible.
- Each submission will receive a response that addresses every submitted comment.
Every submission is saved within the Communications Log. See tab.