We will assist you with the preparation of recommendations, measures and a roadmap to improve your company’s ESG performance.
What is ESG rating?
ESG rating
is a method used for measuring environmental, social, and governance (ESG) practices and corporate efficiency.
ESG criteria
serve to evaluate the company impact on the environment, society and economy, as well as the way it manages its internal operations and stakeholder relationships.
What is the difference between ESG rating and credit rating?
ESG rating is focused on company’s sustainability and impact on society and the environment, whereas the purpose of credit rating is to determine the company’s solvency.
ESG rating agencies
collect data on all kinds of factors, such as greenhouse gas emissions, working procedures, diversity of company boards, and engagement with communities, to evaluate the company’s overall performance. Such rating is also used by investors, analysts, and other stakeholders to assess the company’s long-term sustainability and for the purposes of risk management.
ESG rating methodology
is not unified and every rating agency can thus use various methods and criteria for the purposes of company evaluation. One should also note that ESG rating is only one of the tools available for the evaluation of corporate sustainability and it should be used in connection with other sources of information.
What are the benefits of ESG rating?
This rating helps companies identify and manage risks associated with ESG, such as environmental pollution, working procedures and ethical governance issues. Solving such risks can help companies reduce the likelihood of adverse impacts on their reputation, finance, and statutory obligations.
ESG rating helps companies make contact with their stakeholders, including investors, customers, employees, and communities. By proving their commitment to deal with ESG issues, companies can build trust and loyalty by their shareholders and attract investment and customers to whom sustainability is a matter of priority.
Rating can improve the reputation of a company’s brand by emphasising its sustainable procedures, due management of public issues and ethical standards. Positive ESG evaluation can help distinguish the company from its competitors and attract positive media coverage and acknowledgement of sustainability indexes.
Implementation of ESG into a business strategy has been associated with improved financial performance, including higher profitability, lower cost of capital, and higher long-term values for shareholders. This is due to the fact that companies with strong ESG procedures are more able to perform risk management, attract investment, and fulfil the requirements of investors who are increasingly focused on sustainability.
ESG rating can help companies comply with regulations related to sustainability reporting, such as the EU regulation on sustainability-related disclosures in the financial services sector and Task Force on Climate-related Financial Disclosures (TCFD). By adhering to these regulations, companies can avoid legal risks and reputational risks and thus they can prove their sustainability commitment.
ESG rating process
The rating process may vary with individual rating agencies, but it generally involves the following steps:
Data collection
Rating agencies collect ESG data from various sources such as sustainability reports, financial statements, media news, articles, and regulatory records. They can also use the third-party data providers and perform their own research to add more data.
Framework
The framework of rating agencies for company evaluation is based on several ESG factors such as environmental impact, social responsibility, and company governance. Various agencies use various frameworks; however, they generally involve the assessment of corporate policies, social responsibility procedures, and performance based on ESG factors.
Score
Rating agencies evaluate companies based on their performance within the individual ESG factors. The score may be based on a numerical scale, alphabetical grades or a relative grading system.
Importance
Rating agencies can attribute various importance to each of the ESG factors depending on their significance for the given trade and stakeholders.
Validation
Rating agencies can validate their ratings by various methods such as expert opinions, consultations with stakeholders, and benchmarking.
Reporting
Rating agencies provide their clients, such as investors, asset managers and corporations, with reports where their evaluation, methodology and analysis is described in detail.
Jak vám můžeme pomoci?
Poradenství ESG ratingu přizpůsobíme vašim potřebám.
Identification and selection of the most suitable ESG rating agency
We will guide you through the most relevant rating agencies with respect to your business and your real estate portfolio.
Output: Organisation of an initial workshop and preparation of a report with presentation of rating agencies as well as their pros and cons, and recommendation of a partner who we will contact subsequently.
Guidance through rating process
Following the selection of a rating agency, we will guide you through the entire rating process in order to ensure the best possible outcome.
Output: Organisation of communication with the rating agency, coordination of filling out the relevant documents. The output of this step is process support.
Proposal of a measure to improve rating and the position within the peer group rating
Upon request, we will propose to you:
- Measures to improve future rating
- Roadmap to improve the evaluation and the position within the peer group rating
Output: Final report with recommendations
