ESG Scores & Rating Agencies
Article

ESG Scores & Rating Agencies

September 13, 2022

ESG (Environmental Social Governance) scores or ratings measure a company’s ESG efforts. These scores help communicate a company’s sustainable business practices to both stakeholders and investors. They also assist companies in understanding their ESG shortcomings and how they might improve their ESG strategy or ESG reporting.

In this guide we’ll discuss the importance of ESG scores, known challenges with score standardization, how to find your score, and how to improve your score. We additionally detail the 9 most popular ESG rating agencies to help compare and contrast their value and relevance for your company.

Table of Contents


What Is an ESG Score?

An ESG score or rating is the measure of a company’s environmental, social, or governance perceived risk or overall performance. These scores are used by investors who want to understand a company’s long-term risk as well as by consumers who wish to make more informed purchasing decisions.

Most of the time, an ESG score or rating is given based on how a company performs when compared to its peers. These scores take into account everything from how a company manages environmental risks to how well it emphasizes workplace diversity.

Of course, score and rating criteria will differ depending on the rating agency delivering the score.


ESG Score vs ESG Rating

ESG “score” and ESG “rating” are used often interchangeably. A key difference lies in the use of numerical scores and letter ratings, which differs between rating agencies.

For example, MSCI uses letter ratings ranging from CCC (Laggard) to AAA (Leader). ISS uses numerical scores ranging from 1 (best) to 10 (worst). Other organizations such as S&P Global publish sustainability ratings in classes, like “S&P Global Silver Class.”

Regardless of whether an agency uses a score or a rating, the goal of the result is still the same: to show a company’s ESG performance in a tangible, comparable way.


What Is a Good ESG Score?

A “good” ESG score will differ depending on the rating system. High scores aren’t necessarily best. For example, using DJSI, Refinitiv, or Bloomberg a score of 0 is poor. However, using Sustainalytics, a score of 0 is best (negligible risk.)

For companies who wish to achieve a good ESG score, the goal should be to meet ESG best practices. Companies can do so in many ways. For example, they can perform materiality assessments to determine ESG goals, follow ESG frameworks, and publish relevant ESG disclosure reports to communicate their efforts.


Why Are ESG Ratings Important?

ESG ratings are important to communicate ESG goals and progress with stakeholders and potential investors. For example, ESG ratings:

  • Assist investors in understanding business risk: Many potential investors believe there’s a connection between ESG performance and business success. For the sake of good returns, many investors prioritize investing in companies with promising ESG scores.
  • Underscore a company’s dedication to ESG for employees: Potential employees want to ensure a company’s values align with their own. This is why many often look to a company’s ESG strategy and applicable ratings when considering employment.
  • Highlight a company’s ESG efforts to consumers: Consumers are becoming more and more conscious of the products and services they purchase. Many are looking to do their part in protecting our planet and society by purchasing from companies with strong ESG policies. ESG scores shed light on a company’s ESG efforts on behalf of consumers.
  • Help companies pinpoint ESG shortcomings: One of the key benefits of an ESG score is its ability to pinpoint opportunities and risks within a company’s ESG strategy. For example, poor performance in a specific area can help companies understand the changes required to reduce risk and reach their goals. The shortcomings might simply be with how clear the company did (or did not) report on specific factors.

Challenges With ESG Scores

Although ESG scores are useful tools for stakeholders, they can be problematic as various challenges exist.

  • Data quality is often subpar: Perhaps the most pressing challenge with ESG scoring is the lack of quality data. Companies must report data on their own, which leaves room for data manipulation, lack of transparency, or simply incomplete data. Rating agencies might also use third parties to obtain a company’s ESG data. Data or assumptions used to determine an ESG score might not be accurate and could be a poor or exaggerated reflection of a company’s ESG efforts.
  • ESG score regulation is non-existent: While calls have been made to regulate ESG ratings, no regulation currently exists. Rating agencies are free to follow their own methodologies and requirements for scoring.
  • Different methodologies exist between agencies: The different methodologies between agencies leave room for discrepancies. For example, a company might have a different score depending on the rating system used. This can lead to confusion for companies and stakeholders.

How to Find a Company’s ESG Score

Do you know your company’s ESG score? Even if you didn’t disclose an ESG report, you still might have a public score.

To find a company’s ESG score, first try Googling the company’s name plus “ESG score”. (Google query example: microsoft esg score) For specific scores, visit the rating agency website directly. Some popular score lookups include:


ESG Rating Agencies

Many ESG rating agencies exist around the world today. The following are some of the most commonly used for ESG scoring.

ESG Scores & Rating Agencies Infographic

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To aid detailed comparison, each agency is described below with the following attributes:

  • ESG Scope: Included scope for respective environmental, social, governance factors used to determine the ESG rating
  • Audience: Describes who the rating agency caters scores to
  • # Companies: How many companies have been scored
  • Data Sources: What methodologies have been used to collect and score data (e.g., public data, company disclosures, company/sector survey, NGO, media, manual analysis, artificial intelligence, etc.)
  • Company Input: How companies contribute or request updates, if at all
  • Scoring: Score name and respective letter or numeric grading scale
  • Update Frequency: How often the agency allows/delivers scoring updates

Top ESG Rating & Ranking Agencies

The most popular ESG rating agencies for financial purposes are listed alphabetically below with detailed summaries.

Bloomberg ESG Ratings

Note: A Bloomberg Terminal subscription is required to access the data. The platform also displays CDP, ISS, RobecoSAM, and Sustainalytics scores for ESG.

  • ESG Scope: E-S-G. Covers over 2,000 ESG topics
  • Audience: Organizations in all industries. Mid Cap to Large Cap
  • # Companies: 11,800+ in 100+ countries (~88% of global equity market capitalization)
  • Data Sources: Public disclosures
  • Company Input: Companies can request updates anytime
  • Scoring: Up to 100 (100 is best)
    • Bloomberg Board Composition Scores
    • Bloomberg Environmental & Social Scores
    • Bloomberg Environmental & Social News Sentiment Scores
    • MSCI ESG Solutions
    • Bloomberg Gender Equality Index (GEI)
  • Update Frequency: Daily

Learn more about Bloomberg

Bloomberg Intelligence ESG Dashboard – E&S Score Example. Source

Bloomberg Intelligence ESG Dashboard – E&S Score Example

CDP Scores (Formerly “Carbon Disclosure Project”)

Note: CDP is both a score and an ESG framework. A purchase is required to access granular scoring.

  • ESG Scope: E-G (Some “G” governance focus as it applies to the environment) CDP’s questionnaires are fully aligned with TCFD recommendations.
  • Audience: Organizations in all industries
  • # Companies: 9,600+ companies, 810+ cities (Invited by their customers or investors)
  • Data Sources: CDP questionnaire
  • Company Input: Company questionnaires can be amended prior to the annual deadline for reporting.
  • Scoring: A to D- (A is best) *Leading companies that receive “A” ratings are included on annual CDP “A” List reports for companies and cities.
    • CDP Climate Score
    • CDP Forests Score
    • CDP Water Security Score
  • Update Frequency: Annually

Learn more about CDP Scores

CDP Climate Score Example 2021 - HCL Technologies

CDP Climate Score Example 2021

CDP Forests Score Example 2021 - Taylor Wimpey

CDP Forests Score Example 2021

CDP Water Score Example 2019 - Dover Corporation

CDP Water Score Example 2019

FTSE Russell ESG Ratings

(A subsidiary of LSEG, the London Stock Exchange Group)

  • ESG Scope: E-S-G. Ratings support alignment with the UN Sustainable Development Goals (SDGs) ESG framework.
  • Audience: Companies listed in the FTSE Global Equity Index Series (GEIS).
  • # Companies: 7,200 securities in 47 Developed and Emerging markets worldwide
  • Data Sources: Public quantitative data only. See FTSE ESG Rating Methodology (PDF) for details.
  • Scoring: FTSE ESG Rating: 0-5 (5 is best). Scores are not publicly available; a paid account or subscription is required to access data feeds and reports.
  • Company Input: Invited to provide report feedback within 4 weeks via Sustainable Investment Data (SID) web portal
  • Update Frequency: Annually

Learn more about LSEG - FTSE Russell

FTSE Russel ESG Ratings Data Model. Source

FTSE Russel ESG Ratings Data Model

ISS (Institutional Shareholder Services) ESG Ratings & Rankings

(Formerly “ISS-oekom”)

  • ESG Scope: E-S-G
  • Audience: Organizations in all industries.
  • # Companies: 7,300+
  • Data Sources: Public disclosures, media, AI, stakeholder interviews. Rating analytics additionally provide qualitative summaries regarding opportunities, risk, and performance. See ISS ESG Corporate Rating Methodology (PDF) for details.
  • Company Input: Company review/feedback encouraged every 2-3 years
  • Scoring: (Lookup using the ISS ESG Gateway)
    • ISS ESG Corporate Rating: A+/4.00 (excellent) to D-/1.00 (poor). “Prime” status is awarded to companies with ratings higher than the sector-specific Prime threshold.
    • ISS ESG Scorecard: 0 (very poor) – 100 (excellent)
    • ISS E&S (Environmental & Social) Disclosure QualityScore: 1-10 (1 is best, lowest risk)
    • ISS Governance QualityScore: 1-10 (1 is best, lowest risk)
    • ISS Carbon Risk Rating: 1 (very high risk) - 4 (low risk)
    • ISS Water Risk Rating: 1 (very high risk) - 4 (low risk)
  • Update Frequency: Ongoing

Learn more about ISS

ISS ESG Rating Example - Microsoft Corporation

ISS ESG Rating Example

MSCI (Morgan Stanley Capital International) ESG Ratings

  • ESG Scope: E-S-G
  • Audience: Organizations in all industries. Small Cap to Large Cap
  • # Companies: 14,000+ worldwide
  • Data Sources: Public disclosures, NGO, media, AI, expert analyst review. See MSCI ESG Ratings Methodology (PDF) for details.
  • Company Input: Invited to provide report feedback and/or re-submit reports via the MSCI ESG Portal.
  • Scoring: MSCI ESG Ratings: AAA (leader) to CCC (laggard)
  • Update Frequency: Annually

Learn more about MSCI

MSCI ESG Rating Example - Microsoft Corporation

MSCI ESG Rating Example - Microsoft Corporation

Refinitiv ESG Scores

(In 2021, acquired by LSEG, the London Stock Exchange Group. Prior to 2018, known as “Thomson Reuters Financial & Risk” or “Reuters ESG Scores”)

  • ESG Scope: E-S-G. Factors include environmental factors such as resource use, social factors such as human rights, and governance factors such as CSR strategy. Uniquely includes “controversy” topics.
  • Audience: Organizations in all industries. Mid Cap to Large Cap.
  • # Companies: 9,000 worldwide
  • Data Sources: Public disclosures and manual analyst review. See Refinitiv ESG Scoring Methodology (PDF) for details.
  • Company Input: n/a (Based on public data)
  • Scoring: Refinitiv ESG Scores: 0 (poor) to 100 (excellent)
  • Update Frequency: Weekly

Learn more about Refinitiv

Refinitiv ESG Score Example – Microsoft Corp

Refinitiv ESG Score Example

RepRisk ESG Rating (RRR)

  • ESG Scope: E-S-G. Factors are mapped to UNGC, SASB, and UN SDGs.
  • Audience: Organizations in all industries
  • # Companies: 207,000 public and private companies
  • Data Sources: Public data, stakeholder interviews, media, AI, manual analyst review. See RepRisk ESG Rating Methodology for details.
  • Company Input: None (Intentionally excludes company self-disclosures as part of risk analysis.)
  • Scoring: AAA (low risk) to D (very high risk). Scores are not publicly available; a paid account or subscription is required to access data feeds and reports.
  • Update Frequency: Daily

Learn more about RepRisk

RepRisk ESG Ratings - Source

RepRisk ESG Rating

S&P Global ESG Scores

S&P Global ESG Scores are sometimes referenced as CSA scores or DJSI ESG scores. The Dow Jones Sustainability Indices (DJSI) uses S&P Global data.

TruCost is a now part of S&P Global.

  • ESG Scope: E-S-G
  • Audience: Organizations in all industries. Small Cap to Large Cap.
  • # Companies: 10,000+
  • Data Sources: Public disclosures, S&P Global Corporate Sustainability Assessment (CSA), media, manual analyst review. Uses RepRisk to assist risk analysis. See S&P DJI Score Methodology (PDF) for details.
  • Company Input: Companies can provide additional data to enhance their disclosures.
  • Scoring: S&P Global ESG Scores: Up to 100 (100 is best)
  • Update Frequency: Annually

Learn more about S&P Global

S&P Global ESG Score Sample – Microsoft Corporation

S&P Global ESG Score Sample

Sustainalytics ESG Risk Ratings

Features a two-dimensional materiality framework to measure industry-specific risks as well as five risk levels.

  • ESG Scope: E-S-G. Includes 1,300 data points on 20 material ESG issues.
  • Audience: Organizations in all industries. Small Cap to Large Cap.
  • # Companies: 13,000+ worldwide
  • Data Sources: Public disclosures, NGO, media, and AI. Manual analyst review and qualitative feedback included. See Sustainalytics ESG Risk Ratings Methodology for details.
  • Company Input: Invited to provide feedback prior to report publishing
  • Scoring: Sustainalytics ESG Risk Ratings: 0 (negligible risk) to 40+ (severe risk)
  • Update Frequency: Annually

Learn more about Sustainalytics

Note: In July 2020, Sustainalytics became a subsidiary of Morningstar, one of the world’s largest stock market data providers.

Sustainalytics ESG Risk Report Sample - Source

Sustainalytics ESG Risk Report Sample

How to Improve an ESG Score

Receiving a subpar ESG score isn’t the end of the road for any organization. ESG is an ongoing process. There are many ways organizations can improve their ESG scores.

Organizations should prioritize updating their ESG strategy periodically when new risks and opportunities arise. They should also conduct an ESG materiality assessment, if they have yet to do so, to highlight ESG strengths and weaknesses. Finally, organizations that need support should consider ESG consulting services.


Need Help with ESG Scores or Rating Agencies?

Whether you’re preparing for ESG disclosure or want to improve your ESG score, Armanino is here to support you. Contact our ESG consultants today!


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