Yesterday, I blogged about how investors want to see companies enhance ESG reporting. ESG ratings are just one information source but it’s an area highlighted by investors for improvement. Some ratings firms release a “combined ESG” score at no charge and now, Refinitiv is one ratings firm taking things a step further. Recently, Refinitiv began making its ESG rating information available for free on its website and this includes sub-theme scores within each of “E”, “S” and “G” beyond just the overall combined ESG rating. Refinitiv has an extensive database – their blog post says it provides access to ESG scores on 10,000 companies.
With Refinitiv’s sub-theme scores freely available, investors and other stakeholders can find a company’s Refinitiv score for human rights, product responsibility, innovation, etc. Even if a company’s major investors don’t typically cite Refinitiv scores, with thematic scores freely available, this information could become fodder for questions during shareholder engagement meetings and it’s possible ESG ratings questions could start coming from directors, employees and other stakeholders. For example, if a company talks up its commitment to community, knowing Refinitiv’s “community” sub-theme score can be helpful and if it doesn’t seem to jive, check out whether Refinitiv has pulled accurate information to generate its score.
Dealing with ESG rating challenges can seem like climbing a never-ending hill and for companies without a chief sustainability officer, ESG ratings challenges might increase the odds that they start thinking about appointing one. Given the usual responsibilities of corporate secretaries and IR professionals, it’s hard to imagine either would have time to dive into ESG ratings to the extent needed. If other rating firms follow Refinitiv’s lead in sharing ESG thematic scores freely, anyone dealing with understanding and validating ESG rating provider data just got a whole lot more work.
A recent Paul Weiss memo discusses implications from ESG ratings and serves as a reminder of actions companies can take to protect themselves from ratings inaccuracies. As a first step, companies should actively monitor their current ESG ratings and develop an approach to engage with ESG rating agencies to ensure an accurate assessment of the company’s ESG performance. This includes confirming that ESG rating agencies are using correct data for their analysis. In addition to Refinitiv, the memo identifies MSCI, ISS, RobecoSAM, Sustainalytics and RepRisk AG as common ESG ratings firms but also says there are at least 125 organizations providing ESG ratings and research.
-Lynn Jokela, TheCorporateCounsel.net February 12, 2021