ESG SCORING SYSTEMS

Abstract

An ESG score is an objective measurement or evaluation of a given company, fund, or security’s performance with respect to Environmental, Social, and Governance (ESG) issues. Specific evaluation criteria vary between the different rating platforms that issue ESG scores; however, they all fall within one (or more) of the E, S, or G categories. ESG rating platforms determine a weighting for each measurement criterion; then, they assess an organization’s performance against each criterion. An organization’s final ESG score is typically a sum-product of the criteria ratings and the (proprietary) criteria weightings. An ESG score is an evaluation of an organization’s performance against various sustainability metrics (related to either environmental, social, or governance issues). ESG scores are generated by rating platforms where analysts evaluate corporate disclosures, conduct management interviews, and review publicly available information about an organization to provide an objective rating of the organization’s performance.