What is the factors or scoring criteria in Sustainalytics ESG risk ratings?
Sustainalytics is a leading provider of environmental, social, and governance (ESG) research and ratings. Their ESG risk ratings assess the ESG performance and risk exposure of companies based on a range of criteria. While the exact factors and scoring criteria used in Sustainalytics ESG risk ratings are proprietary and may evolve over time, I can provide you with a general overview of the types of factors that are typically considered in ESG risk assessments. These factors can include:
Environmental Factors: This category assesses a company's impact on the environment and its management of environmental risks. It may include factors such as greenhouse gas emissions, resource usage, waste management, pollution control, climate change strategies, and environmental compliance.
Social Factors: Social factors focus on how a company manages its relationships with its employees, customers, suppliers, and local communities. It may include factors such as labor practices, health and safety performance, human rights policies, diversity and inclusion, product safety, customer satisfaction, and community engagement.
Governance Factors: Governance factors evaluate the structure, transparency, and effectiveness of a company's governance practices. It may include factors such as board composition, executive compensation, shareholder rights, ethics and integrity, risk management, anti-corruption measures, and compliance with legal and regulatory requirements.
Industry-Specific Factors: Sustainalytics considers industry-specific factors that are relevant to the company's sector. Different industries have unique ESG risks and challenges, and these factors are taken into account to provide a contextual assessment of a company's performance.
Controversies and Incidents: Sustainalytics also examines any controversies or incidents related to ESG issues that a company may have been involved in. This can include legal violations, environmental accidents, labor disputes, human rights controversies, or any other significant events that may impact a company's ESG risk profile.
It's important to note that the exact weightings and scoring criteria for these factors may vary, and Sustainalytics continuously refines their methodology to reflect evolving best practices and stakeholder expectations. The specific analysis conducted by Sustainalytics is based on a combination of publicly available information, company disclosures, regulatory filings, media reports, and other reliable sources of data.
Sustainalytics assigns an ESG risk rating to companies based on their analysis, which helps investors and stakeholders assess the relative ESG risks of different companies within an industry or investment portfolio. The ratings can be used to support investment decision-making, risk management, and engagement with companies on ESG issues.