Sustainalytics® ESG Risk Ratings
Sustainalytics’® ESG Risk Ratings are designed to help investors identify and understand financially material ESG risks at the security and portfolio level and how they might affect the long-term performance for equity and fixed income investments. ESG Risk Ratings, combined with qualitative analyses, provide clients with a differentiated risk signal and deeper insights into the materiality of certain ESG issues for a company and what the company is or is not doing to manage them effectively.
1. Company ratings are categorized across five risk levels: negligible, low, medium, high and severe
2. A company’s risk is measured against its industry peers and against the global universe
3. The magnitude to which a company is exposed to ESG Risk and how well the company is managing that risk is measured and explained
4. Material ESG Issues (MEIs) are identified and brought into focus
5. Transparency into Company Events that may impact a company’s operations, stakeholders or the environment
Key Features and Benefits
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