ESG Rating: 12 Agencies that tell ESG Investors where to invest

Having access to funding or credit is the life blood of almost all businesses, as a result, knowing how to attract investment is essential. ESG (environmental, social, and governance practices) scores are ratings based on assessments done by ESG rating agencies that help investors to identify companies with strong ESG performance relative to their competitors. But how do you know which ESG rating agency is right for you?

The ESG rating providers herein have been rated by ESG analysts and investment professionals. These ESG rating agencies offer a variety of services from stock selection and picks, providing research on specific sectors or industries as well as due diligence.

Benefits of ESG Rating

1. They provide valuable insights into a company’s performance in areas not always captured by traditional financial metrics to investors and companies. For example, a company may have strong financial performance but fall short in environmental safety or labour practices. ESG ratings can help investors identify companies that positively impact society and the environment.
2. Helps businesses attract investment from investors when making investment decisions by making them pay attention to ESG factors, companies that perform well in these areas will attract investment and be successful in the long term.
   A concept known as “ESG integration” is a way to align investments with personal values and beliefs of investors.
3. ESG ratings can also help companies identify positive and negative impacts in specific areas and where they can improve their performance and align with societal expectations to enhance their reputation, risk management, and long-term financial performance.

12 ESG Rating Agencies near you

Numerous ESG ratings agencies and using different methodologies, each offering a unique approach to evaluating a company’s performance. For example, some agencies focus on a company’s carbon footprint and energy efficiency, while others emphasize labour practices and human rights. Additionally, some agencies use a quantitative approach, analyzing data such as financial performance, while others use a qualitative approach, conducting interviews and site visits.

#1: FTSE Russell ESG Ratings

FTSE Russell‘s ESG Ratings and data model provide investors with a comprehensive understanding of a company’s exposure and management of ESG issues based on publicly disclosed information. The model includes 7,200 securities in 47 developed and emerging markets with data from 300 plus indicators unique to a company’s circumstances. FTSE ESG Scores are then calculated using an Exposure-weighted average, a higher indicator weight determines a company’s scores in alignment with UN Sustainable Development Goals (SDGs). The data is designed to assist in managing exposure to ESG issues, meet stewardship requirements, integrate ESG data into securities and portfolio analysis, and implement ESG-aware investment strategies.

#2: Bloomberg ESG Ratings

Bloomberg ESG provides a service that evaluates companies annually by collecting publicly available information on ESG through corporate social responsibility (CSR) or sustainability reports, annual reports, websites, and other public sources, as well as through direct contact with the companies. Their rating scale ranges from 0 – 100.The data input is verified and standardized using a set of indicators covering environmental, social, and governance issues, such as carbon emissions, climate change impact, pollution, waste disposal, renewable energy, resource depletion, supply chain, political contributions, discrimination, diversity, community relations, human rights, executive compensation, shareholder rights, takeover defense, staggered boards, and independent directors.

#3: ISS (Institutional Shareholder Services) ESG Ratings & Rankings

The ISS Quality Score rating scale is from 1 -10, with a score in the upper decile indicating relatively higher quality governance practices and lower governance risk, while a score in the 10th decile indicates relatively higher governance risk. Their scoring methodology analyzes.

#4: S&P Global ESG Scores

S&P Global ESG Scores are a measure of a company’s exposure to and performance on key environmental, social, and governance (ESG) risks and opportunities. The scores focus on quantitative, performance-driven metrics, as well as management programs and policies across 61 sub-industries. The scores are measured on a scale of 0 – 100, with 100 denoting the maximum score. The ESG assessments are based on availability, quality, relevance, and performance of data points on ESG topics. The scoring system is based on S&P Global Corporate Sustainability Assessment (CSA), invites are sent to companies to participate and responses and evidence is solicited, updates are made on a monthly basis if any.

#5: Sustainalytics ESG Risk Ratings

Sustainalytics is a leading provider of ESG research and data, which helps investors identify and manage the risks and opportunities of investing in companies based on their environmental, social, and governance practices. They cover over 6,500 companies across 42 sectors, with a presence in multiple countries.

The rating scale used by Sustainalytics uses a rating scale of 1-100 in scoring, which is based on a sector/industry comparison. The ESG indicators are split into three dimensions: preparedness, disclosure, and performance. The set of issues and indicators analyzed vary from industry to industry and weights are placed on each indicator to give the final ESG respective scores.

#6: Corporate Knights Global 100

The Corporate Knights Global 100 is an annual ranking of the world’s most sustainable corporations. The ranking is conducted by the Corporate Knights Research wing based in Toronto. The Corporate Knight Global 100 ranking is done through rigorous assessment of public companies with revenue over $1 billion and is based mostly on publicly disclosed data. The ranking is based on 24 key performance indicators (KPIs) covering resource management, employee management, financial management, clean revenue & clean investment, and supplier performance. Eligibility for the ranking is based on size and Corporate Knights Industry Group and geography. The ranking is meant to be representative of business sustainability in the current socio-economic context and is transparent, objective, and based on public data.

#7: Moody’s ESG

Moody’s ESG rating assessments measure the degree to which companies manage environmental, social, and governance (ESG) factors that affect their financial performance and how their business impacts the environments and societies in which they operate. The assessments are based on double materiality, meaning they include external environmental and social risks to financial performance, as well as how the company’s operations impact its surroundings.

The assessment of a financial institution’s exposure to ESG risks and benefits is primarily qualitative, and the methodology describes relevant considerations generally applicable across financial institution sectors.

#8: Thomson Reuters ESG Research Data

Thomson Reuters ESG Research Data provides solutions that analyze environmental, social, and governance (ESG) factors for over 6,000 public companies. The company uses a percentile rank scoring system to calculate its ESG scores, the scores are based on over 400 different ESG metrics grouped into 10 categories: Resource use, emissions, innovation, management, shareholders, CSR strategy, workforce, human rights, community, and product responsibility. Each category is weighted based on the relevance.

#9: Dow Jones Sustainability Index (DJSI)

Dow Jones Sustainability Index (DJSI) is a float-adjusted market capitalization-weighted index that measures the performance of companies selected based on Environmental, Social, and Governance (ESG). In partnership with S&P Global, it provides investors with objective criterion in managing sustainability investment portfolios. The DJSI index family includes sub-indices excluding companies engaged in certain unsustainable activities. The S&P Global ESG Score, calculated under the S&P Global Corporate Sustainability Assessment (CSA) is a key factor in the selection. Assessments are based on industry classification on the last business day of March, changes to domicile or industry make companies eligible under the new classification beginning with the subsequent assessment cycle. In the case of multiple classes of stock, only the stock with the largest float-adjusted market capitalization is considered for selection.

#10: MSCI (Morgan Stanley Capital International) ESG Ratings

MSCI (Morgan Stanley Capital International) ESG Ratings , MSCI ESG solutions provide a comprehensive evaluation of a company’s environmental, social, and governance performance. They provide ESG ratings for over 6,000 global companies and more than 400,000 equity and fixed-income securities. The ratings are based on a scale of AAA - CCC updated on a weekly basis as well as providing in-depth annual reviews. MSCI ESG Research looks at 37 key ESG issues, divided into three domains (environmental, social, and governance) and ten themes. The data is collected from various sources such as government databases, company disclosures, and macro data from academic, government, and NGO databases.

#11: Refinitiv ESG Scores

Refinitiv’s ESG scores provide a transparent and objective measurement of a company’s environmental, social, and governance performance, commitment, and effectiveness. Based on publicly available data, the scores are calculated using over 630 company-level ESG measures, which are grouped into 10 categories and finally into the three domain scoring areas. Some of the categories include emissions, environmental product innovation, human rights, shareholders, and more. The final ESG score reflects the company’s performance, commitment, and effectiveness based on publicly reported information. It allows investors to understand a company’s exposure to ESG issues, helping them make informed investment decisions. Companies are given access to review and provide feedback on the data used in the assessment, and Refinitiv’s team of analysts will determine if a change in assessment is warranted.

#12: CDP Scores

CDP ESG has a scoring system that works to incentivize companies to disclose and take action to reduce their environmental impacts. CDP uses a scoring system to incentivize companies to measure and manage environmental impacts through participation in CDP’s Climate Change, Water, Forests, and Supply Chain programs. Their scoring system generally assesses the level of detail and exhaustiveness of responses on awareness of environmental issues, management methods, and progress toward environmental stewardship. CDP’s scoring system cover areas such as: Disclosure, Awareness, Management, and Leadership.

Why Differences in ESG Rating Assessments

Every rating agency has a different approach to evaluating a company’s performance. For example, some agencies focus on a company’s carbon footprint and energy efficiency, while others focus on labor practices and human rights. Additionally, some agencies use a quantitative approach, analyzing data such as financial performance, while others use a qualitative approach, conducting interviews and site visits.

Investors should consider the different rating methodologies available and choose the one that best aligns with their investment goals and beliefs. It is important to note that no single rating system is perfect, and investors should use multiple sources of information to make investment decisions.