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Unlike credit ratings, ESG Ratings are prospective analyses focused on qualitative issues, company performance data, the ability to face risks, and generation of future opportunities. These characteristics, determined by agency analysts, show company commitment to ESG factors.
ESG rating agencies such as Refinitiv, S&P Trucost and RobecoSam, Sustainalytics, and many others provide important data and frameworks that asset managers increasingly rely on. Ratings are used as tools to assess, measure, and compare company ESG performance.
MSCI is a leading ESG rating agency that has a global team of 185 experienced research analysts that assesses thousands of data points across 37 key issues in ESG. This is done to paint a clear picture of the company’s core business and industry issues that might create significant risks or opportunities in the future. In MSCI ESG Ratings, companies are rated on an AAA-CCC scale, relative to the standards and performance of industry peers.
MSCI studies indicate that strategies focused on increasing a portfolio’s exposure to companies with higher ESG ratings or to companies improving their ESG ratings have outperformed the S&P 500 over the past 30 years. How? Companies with adherence to good administrative, social, and sustainability practices can avoid financial losses caused by labor disputes or environmental damage fines among others, generating long-term value for shareholders.
Modern investors, in both public and private markets, are demanding ESG data, research, ratings, and solutions to make informed and meaningful investment decisions. As the market for ESGs continues to expand, and analysis criteria becomes more widely used, the need to create standards will become increasingly apparent. Taking actions to aid efficiency and comprehension are key. Join Physis today to make a difference!
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