Company ESG Risk Rating - Sustainalytics (2024)

FAQs

What is a good Sustainalytics ESG score? ›

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+).

A low ESG score is relatively poor. Though the scoring and rating scales vary between agencies, a score below 50 is bad, while a score above 70 is considered strong.

ESG scores can be found online via brokerage platforms, financial portals, and rating agency websites. Investors use ESG scores to make informed investment decisions and assess the sustainability of a company's operations.

We consider an ESG issue to be material within our rating if it's likely to have a significant effect on the enterprise value of a company.

The ESG Risk Rating provides investors with an overall company score based on an assessment of how much of a company's exposure to ESG risk is unmanaged. The more of this risk that is unmanaged, then the higher the ESG Risk Rating score.

Average – Average ESG scores are between 50-59. The company likely isn't implementing most ESG best practices, isn't actively working toward ESG goals, and has adverse environmental, social, or governance effects. Poor – A score of 50 or less is considered a poor ESG score.

ESG Score vs ESG Rating

ESG “score” and ESG “rating” are used often interchangeably. A key difference lies in the use of numerical scores and letter ratings, which differs between rating agencies. For example, MSCI uses letter ratings ranging from CCC (Laggard) to AAA (Leader).

Investors use these unique scores as a proxy of ESG performance. Companies that score well on ESG metrics are believed to anticipate future risks and opportunities better, be more disposed to longer-term strategic thinking, and focus on long-term value creation.

According to the Harvard Law School Forum on Corporate Governance, “most international and domestic public (and many private) companies are being evaluated and rated on their environmental, social and governance (ESG) performance by various third-party providers of reports and ratings.” In turn, ESG scores are used by ...

Provisional - ESG Rating Private Company Assessment

Investors, including asset managers, pension funds and individual investors, can use the ratings to assess the sustainability performance of companies they are considering investing in.

Who handles ESG at companies? ›

In some cases, companies may establish a dedicated position to lead the company's ESG efforts. This person often holds the title of Chief Sustainability Officer (CSO) or Vice President of Sustainability.

These scoring systems can be from finance and investment firms, consulting groups, standard-setting bodies, NGOs, and even government agencies. Broadly speaking, however, there are two major categories of raters that generate ESG scores – these are external and internal stakeholders.

Comprehensive Coverage

Sustainalytics' ESG Risk Ratings span more than 14,000 companies and covers most major global indices.

Surveys and interviews: Companies can survey and interview employees, customers, suppliers, and other stakeholders to get their perspectives on ESG risks. Data analysis: Companies can analyze their own data, as well as third-party data, to identify and assess ESG risks.

Low risk (overall score of 10-19.99 points): Enterprise value is considered to have a low risk of material financial impact driven by ESG factors. Medium risk (overall score of 20-29.99 points): Enterprise value is considered to have a medium risk of material financial impact driven by ESG factors.

The most popular research-based ratings are those of MSCI, Sustainalytics, and Moody's (formerly Vigeo Eiris). It's important to keep in mind that these firms can generate an ESG rating without your input; should this occur, it's important to understand what was assessed, and how.

The Morningstar Sustainability Rating helps investors evaluate funds based on environmental, social, and governance (ESG) characteristics. Ratings are expressed using a five-globe system, with one globe being the lowest score and five globes the highest.