Overview

The Risk Score provides investors and corporates with a transparent and systematic assessment of the sustainability exposure of corporate entities. The Risk Score measures company exposures, using a normative assessment, relative to universal principles of corporate conduct as defined by the ten principles of the UN’s Global Compact (GC).

The Risk Score comes with a transparent methodology and full disclosure of the underlying data. This allows users to understand the performance drivers, explain score changes at each level of the assessment, and drill down to the associated raw data. The score is designed with both investors and corporates in mind. Investors can use the score as a universe selection tool by identifying companies that are more exposed to critical sustainability issues. Corporates can use the score to systematically assess their own exposures, conduct peer comparisons, and identify disclosure gaps.

Components

The Risk Score has two complementary offerings:

1. Risk Score – CORE: Scores showing the alignment of company practises and actions to the UNGCand their resulting sustainability exposure, based on publicly available company reported data. Scores are derived using a transparent aggregation methodology.

2. Risk Score – PLUS: The PLUS score is the CORE score including Media and NGO coverage. It accounts for incidence and risk evident in news sources and NGO reports. Combined, CORE and PLUS scores allow users to differentiate performance based on company reported data (annual) and global news (daily).

The Risk Score includes the following components in both "Core" and "Plus" offerings:

• Total Scores – Total Aggregated Score from the 4 Pillars.
• Pillar Scores – Aggregated Scores for 4 GC Pillars, from the 10 Principles.
• Principle Scores – 10 GC Principle Scores.

The Risk Score additionally includes the following component in the “Plus” offering:

• Exposure Flags – Flags showing poor performance in the 10 GC Principles.

Methodology

The Risk Score CORE uses publicly available company data to show the alignment of company policies, practises and actions to the principles of corporate conduct represented in the UN Global Compact. It can be used by investors and corporates for screening and universe selection, risk modelling, peer benchmarking, and identification of disclosure gaps. The Risk Score CORE is calculated in four steps:

1. Data Collection
2. Data Processing
3. Principle Score Calculation
4. Pillar & Total Score Calculation

Data Collection

The Risk Score is powered by ESG Book’s proprietary data. ESG Book’s proprietary data includes 450+ indictors across two data modules – ESG Raw Data and Emissions Plus – and cover 9,000+ companies. This data is collected in-house by sustainability experts and validated using more than 110 checks including checks on completeness, conformity, validity, accuracy, consistency, uniqueness, reasonableness, and timelines.

Upon collection, data points are standardized to SI units (for quantitative metrics), USD Thousands (for monetary metrics), and Tonnes CO2 Equivalent (for Kyoto Gases).

Data Processing

The standardized data is used to create additional metrics including intensities, proportions, and growth rates. These derived metrics are calculated by integrating one or multiple metrics. Examples include Scope 3 disclosure, which results from the existence of Scope 3 quantitative data, and renewable energy consumption proportion, which results from dividing the total amount of renewable energy consumed by the total amount of energy consumed.

The Risk Score is powered by 202 metrics from the ESG Raw Data and Emissions Plus modules, as well as our proprietary set of derived metrics. These metrics include quantitative metrics (e.g., injury rate) as well as categorical metrics (e.g., presence of GHG emissions reduction targets). The metrics measure preparation, i.e., what a company is doing to achieve sustainability goals (e.g., health and safety training), as well as outcomes, i.e., the actual sustainability achievements (e.g., injury rates).

Most companies report sustainability data on a yearly basis. To enable daily-updated scores, we forward-fill the data. During historical calculation we add a lag of six months to the reporting period end date to accommodate for the time needed to publish reports. This ensures that our scores reflect market knowledge at any point in time. We consider sustainability data valid for a period of up to two years. After this period, the data expires and are no longer used in scores. Our live scores are powered by the most recent disclosures available. Hence, as soon as new data from a more recent disclosure is captured, it is used in our scores.

These metrics are transformed to a uniform scale ranging from 0 to 100. This is done using a relative scoring approach. Relative scoring expresses company performance relative to all other companies in a universe. This is achieved through kernel density estimation and percentile rank techniques. Put simply, the transformed data indicates where a company stands within a universe. A score of 100 indicates best and 0 indicating worst performance. A value of 50 indicates that the company's performance is average - meaning that about 50% of companies perform worse and 50% perform better.

Principle Score Calculation

The Principle Scores offer a nuanced perspective on companies’ sustainability exposure relative to 10 GC Principles (see for detailed definitions of the issues). The Principle Scores are based on the UN Global Compact and provide the foundation for the higher-level Pillar and Total Scores. The 10 Principle Scores are calculated based on the input metrics. Metrics are mapped to the respective categories under consideration of the following guiding principles:

a) Topics are comprehensively operationalized. Key aspects of the underlying GC Principle are reflected in the selected metrics. b) Select metrics that cover all dimensions of risk management and prevalence as defined by the UNGC: Commitment, Monitoring & Assessment, Integration & Remediation, Communication, Action, and Evidence. c) Select metrics according to the specificity of the principle definition. Principles based on a specific issue (e.g. Child Labour) will have fewer metrics selected than Principles based on a broader there (e.g. Human Rights Support).

Principle Scores are calculated as the weighted average of the underlying transformed metrics, ignoring missing values. Weights are determined by classifying metrics as either primary or secondary. Primary metrics are determined as : 1) The policy metric on the central theme of the principle (e.g., Human Rights policy for principle 1: Human Rights Support) 2) Evidence metrics that show that the company is acting against the theme of the principle (e.g., Money Laundering Lawsuits for principle 10: Anti-corruption).

Primary metrics receive twice as much weight as secondary metrics.

To receive a Principle Score, companies need to be part of our scoring universe and report at least three metrics of the respective principle. The resulting scores range from 0 to 100 with higher values corresponding to better performance.

The resulting weighted averages are rescaled for better visibility of performance difference. This is done such that 50 still corresponds to average performance. The same scaling factor is applied to all principles

Pillar and Total Scores Calculation

The higher-level scores encompass two levels of abstraction. The Total Score provides a condensed view of a company’s sustainability exposure in a single number, while the Pillar Scores provide insights into the risk relative to specific areas of corporate responsibility. The calculation of these scores follows a hierarchical logic.The Pillar Scores are calculated as the average of all underlying principle scores. The Total Score is calculated as the average of the four Pillar Scores. A company must have all four Pillar Scores in order to receive an overall Score.

Risk Score PLUS

The Risk ScorePLUS provides media and NGO coverage corrected scores that account for recent sustainability events. For more detail on the full methodology, please reach out to obtain the methodology document.

Metadata

Pricing Information

Pricing is determined on a use-case basis, thus please contact for more information.

When requesting please include the following information:

• Organization Name
• Position (non-mandatory)
• Business Email Address or Telephone Number
• Country
• Use-case

Regulatory and Compliance Information

This product is allowed for internal use only, users are not allowed to distribute the data externally.

If you're interested in a re-distribution of data use case, please contact us.

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