Why Should Companies Get Their ESG Rating Done?
A study by Kroll# analyzed data from over 13,000 global companies over an eight-year period (2013-2021), published by MSCI, finding a strong link between ESG ratings and financial performance. The outcome reflects glaring 50% higher returns by Companies who had higher ESG ratings and achieved an average annual return of 12.9%, as compared to 8.6% for those with laggards in ESG Ratings.
The study was done across regions including India, North America, Western Europe and Asia
It clearly shows that higher ESG ratings, are crucial to boost investor confidence and are increasingly driving investment decisions of investors across the world. This trend same in U.S.A, where ESG leaders achieved a 20.3% return, nearly 50% higher than lower-rated peers.
Deductions
a. LEADERS IN ESG RATING, DELIVER 50% HIGHER RETURNS TO INVESTORS
b. WHICH IS WHY INVESTORS SEEK ESG RATING BEFORE MAKING AN INVESTMENT DECISION
c. THIS INTURN LEADS TO INCREASE IN COMPANY’S MARKET CAPITALISATION
17 Types of ESG Ratings to choose from, as per your need
| Category of Rating Product | Name of Rating Product | Product Description | Assured Data Required | # of KPIs | # of Data points | Why Companies, Investors & Investees opt for it? |
|---|---|---|---|---|---|---|
| Standard ESG Ratings | ||||||
| ESG Performance Rating | ESG Rating | This rating measures a company's exposure to industry specific material ESG risks and the ability to manage those risks relative to peers. It provides an absolute measure of ESG performance. | No | 128 | 335 | To understand why ESG Investors are investing in Competition peers |
| Transition Rating | This rating measures a company's current preparedness and performance as a going concern towards a low carbon economy, with a focus on transition risks. | No | - | - | To measure if you are making enough investments for transition towards net zero emissions | |
| Combined ESG Rating | Combines ESG performance and transition risk to provide a single rating. This helps investors understand a company's overall ESG risk profile. | No | - | - | To measure if you are making enough investments for transition towards net zero emissions | |
| ESG Core Rating | Core ESG Rating | This rating measures a company's exposure to industry specific material ESG risks and the ability to manage those risks relative to peers. It provides an absolute measure of ESG performance. | Yes | 128 | 335 | To understand why ESG investors are investing in companies |
| Core Transition Rating | This rating measures a company's current preparedness and performance as a going concern towards a low carbon economy, with a focus on transition risks. | Yes | - | - | To understand why ESG investors are investing in companies | |
| Combined Core Rating | Combines ESG performance and transition risk to provide a single rating. This helps investors understand a company's overall ESG risk profile. | Yes | 31 | 57 | To understand if you are compliant with ESG regulations (EU SFDR) | |
| BRSR Core ESG Rating | BRSR Core Rating | BRSR Core rating is provided based on assured data pursuant to the nine principles of Business Responsibility and Sustainability Report (BRSR) Core | Yes | 31 | 67 | To understand if you are compliant with SEBI's regulations & NGRBC principles |
| Theme Based ESG Ratings | ||||||
| Environmental Based Themes | Climate Change | The ESG rating measures a company's performance on climate change aspects such as carbon emissions, waste & effluents etc | No | 26 | 56 | To understand your contribution towards mitigating climate change |
| Natural Capital | The ESG rating measures a company's performance on natural capital such as land and resource usage etc | No | 12 | 23 | To understand if you are making judicious use of natural resources | |
| Social Based Themes | Human Resource Management | The ESG rating measures a company's management of internal stakeholders, especially employees including topics like health & safety, equity, inclusion & diversity etc. | No | 26 | 89 | To understand if you are managing your workforce well |
| Social Responsibility | The ESG rating measures a company's management of external stakeholders such as community & customers including topics like product safety | No | 17 | 40 | To understand if you are considered as a socially responsible company | |
| Mixed Themes | Value Chain Management | The ESG rating measures a company's management of its value chain including labor rights and environmental management systems within the value chain | No | 9 | 39 | To understand if you are vigilant enough regarding the social and environmental impact of your value chain |
| Governance Based Themes | Business Ethics | The ESG rating analyses the how ethical are the business practices of a company | No | 19 | 41 | To understand if your business conduct is considered ethical |
| Corporate Governance | The ESG rating analyses the board structure & policies of a company including complaince with India's Company's Act 2013 | No | 23 | 68 | To understand if you are following best corporate governance practices | |
| Pillar Based ESG Ratings | ||||||
| Environment | Environment Ratings | The ESG rating measures a company's performance on environmental aspects | No | 43 | 97 | To measure your environmental performance in comparison with your industry peers |
| Social | Social Rating | The ESG rating measures a company's performance on social aspects | No | 43 | 129 | To measure your social performance in comparison with your industry peers |
| Governance | Governance Rating | The ESG rating measures a company's performance on governance aspects | No | 42 | 109 | To measure your governance performance in comparison with your industry peers |
ESG Performance Score
We assess you on various ESG parameters to understand your ESG performance for the ongoing assessment year. This includes an in-depth analysis of your policies and disclosures. The comparison is not done on an absolute yardstick basis, but the metrics are evaluated based on your size of operations.
ESG Core Score
This rating is provided on the basis of assured data provided under the nine principles of BRSR (Business Responsibility & Sustainability Report) Core by you. It measures your performance on the nine principles which are a mandatory disclosure for top 1000 listed companies.
Ratee Company Insights
We conduct a comprehensive analysis of your ESG performance and provide an extensive report with insights that can help the company evaluate its position on various ESG Key Factors as compared to industry leaders.
SWOT Analysis
Our expert data analytics team does an in-depth analysis to present your strengths and weaknesses in the context of ESG initiatives undertaken. The team also shares the Opportunities and Threats presented by the changing ESG landscape and regulations in the country.
Risk Analysis
The report also shares insights into the short-term, medium-term and long-term risks posed by ESG issues to you and what steps you can take to reduce their exposure to the risks.
Approach to ESG
The data analytics team also summarizes the overall approach taken by you on topics such as ESG Risk, Materiality Assessment & Stakeholder Engagement and gives a comparative analysis with the industry leaders to give insights into best practices.
Integration of ESG into Governance
Good governance is considered to be the base of a successful company; hence we evaluate the integration of ESG initiatives and goals into Governance practices to get a holistic view on your ESG policy.
Peer Comparison
We give you an overview of the industry’s ESG best practices and recommend the factors that can be integrated into your ESG policy.
Performance On Industry Specific KPIs
We have carefully allocated sector specific Key Factors to different industries and evaluate your performance on the same. An example of industry specific KPI’s are:
- Banks
- No of Non-Performing Assets
- Investment in Green Businesses
- Investment in Fossil Fuel
- Micro-financing
Recommendations & Suggestions
We give an elaborate overview of the ESG performance and subsequently give recommendations and suggestions along with areas of improvement to you to improve your ESG performance in the future.
View our sample ESG Ratings Report here