Forward looking, qualitative, and data-driven assessment of an entity’s environmental, social, and governance (ESG) performance and preparedness for future risks and opportunities
Many businesses have understood that better management of environmental, social, and governance (ESG) factors can minimize costs, mitigate risks, or potentially create opportunities to generate revenue.
S&P Global Ratings’ ESG Evaluation, which is not a rating and is distinct from any piece of its ratings criteria, reflects a burgeoning question in the investment community: how are environmental, social, and governance (ESG) factors captured in decision making and how do they affect an entity’s capacity to operate successfully in the future? And, importantly, how could ESG factors potentially lead to a material direct or indirect financial impact on the entity?
First, we establish an ESG Profile for a given entity, which assesses the exposure of an entity’s operations to observable ESG risks and opportunities, accounting for the governance structure in mitigating risks and capitalizing on opportunities. The ESG Profile analysis starts with a global assessment of ESG-related exposure by sector and location, which we call the ESG Risk Atlas.
Second, we assess the entity’s long-term Preparedness, namely its capacity to anticipate and adapt to a variety of long-term plausible disruptions. These disruptions are not limited to environmental and social scenarios, but could also include technological or regulatory changes where relevant, among other factors.
- Our ESG Evaluation incorporates both public and private data, combines both quantitative and qualitative analysis, and considers both the near-term and longer-term risks and risk mitigants.
- Our ESG Evaluation helps investors to assess an entity’s adaptability through our assessment of each industry’s sector-specific ESG risks and opportunities, geographic risk, management engagement, and our assessment of the entity’s preparedness for potential disruptions due to ESG factors in the longer term.
- Our ESG Evaluation captures insights from our credit analysts based on deep sector knowledge and information gained from interactive meetings with an entity’s management.
Today, investors who deliberately apply an ESG lens to investing are growing rapidly worldwide as more come to realize the risks of separating such issues from business fundamentals. S&P Global Ratings’ ESG Evaluation is for companies looking to help their investors gain a better understanding of their strategy, purpose and management quality.
The Importance of ESG Evaluation for Investors:
- Gain deeper insights into the risk and opportunities facing businesses you are investing in
- Meet your clients’ needs and requests, and satisfy your ESG mandates
- Adhere to climate finance and regulatory investment targets and disclosure standards
The Importance of ESG Evaluation for Entities:
- Help your investors better understand your company’s strategy, corporate purpose, and management quality
- Send a strong, pro-active message to stakeholders and appeal to more women and millennials as employees and customers
- Be proactive and prepared as more investors are requesting specific objectives around an entity’s ESG strategies and monitoring their progress
About S&P Global Ratings
S&P Global Ratings is the world’s leading provider of independent credit ratings. Our ratings are essential to driving growth, providing transparency and helping educate market participants so they can make decisions with confidence. We have more than 1 million credit ratings outstanding on government, corporate, financial sector and structured finance entities and securities. We offer an independent view of the market built on a unique combination of broad perspective and local insight. We provide our opinions and research about relative credit risk; market participants gain independent information to help support the growth of transparent, liquid debt markets worldwide.
S&P Global Ratings is a division of S&P Global (NYSE: SPGI), which provides essential intelligence for individuals, companies and governments to make decisions with confidence. For more information, visit www.spglobal.com/ratings.
For more information, please contact S&P Global Ratings.
For general inquiries: Nichol Merritt Director Business Development, Americas Nichol.merritt@spglobal.com 347-325-2437
For existing clients: JP Krejci Head of Relationship Management, Corporate Finance Jason.krejci@spglobal.com 312-233-7022