Company ESG Risk Rating - Sustainalytics (2024)

FAQs

What is a good Sustainalytics ESG score? ›

They use a range of methodologies and consider many factors when determining a company's ESG rating. Some ESG ratings (or ESG scores) methodologies give a range from 0-100, with 70 and above considered a “good” ESG rating and 50 and below considered a “bad” rating.

ESG scores are a measure of how well a company addresses risks and concerns related to environmental, social, and corporate governance issues in its day-to-day operations.

What is a good ESG score? Investors can compare a company's performance to that of industry peers and companies from other sectors by assigning an ESG score, which can range from 0-100. A score of less than 50 is regarded as poor, while a score of more than 70 is considered excellent.

Measures exposure and management of over 20 industry-specific material risks, supported by over 200 indicators and over 1,800 data points.

Is a low ESG score good? 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.

Quantifying ESG risk involves understanding relevant ESG factors for an entity, understanding each factor's importance for the entity, assigning weights based on the importance, and then scoring an entity's initiatives and measures to mitigate the ESG risk.

An ESG Scoring Example

If a manufacturing company scores 80 out of 100 on environmental factors, 70 on social factors, and 90 on governance factors, the final ESG score would be calculated as follows: (0.5 * 80) + (0.3 * 70) + (0.2 * 90) = 76.

Nike, Inc. is the leading global brand in athletic footwear and apparel, with a focus on basketball, running, and football (soccer) categories. With a low-risk ESG score of 18.7, Nike sells its products worldwide through various channels, including company-owned stores, franchised stores, and third-party retailers.

What is Tesla's ESG score? ›

Sustainalytics' ESG Risk Ratings are designed to help investors identify and understand financially material ESG risks at the security and portfolio level. To this end, the ESG Risk Rating captures an issuer's exposure to material, industry-specific ESG risks and an issuer's management of those risks.

According to the Corporate Governance Institute, “an ESG score is a measurable statement of impact, grading success and challenges within the vast field that is environmental, social and governance.” Often used interchangeably with ESG ratings, ESG scores provide a snapshot of how effectively a company addresses ESG ...

Sustainalytics assesses companies for their level of involvement in controversies that have an impact on the environment or society and the associated business risks companies face from such involvement. Each controversy is categorized from Category 1 (low ESG impact) to Category 5 (severe ESG impact).

ESG reports should be structured and formatted in a way that is easy to understand and follow, with a clear summary of the most important findings and trends. Ensuring transparency and disclosure.

Category 5 – Severe The Event has a severe impact on the environment and society, posing serious business risks to the company.

These ratings are predicated on the notion that companies with better scores will exhibit better financial performance over time because they face lower ESG risks, are more adept at managing them, or some combination thereof, as a CFA Institute blog suggests.