The global economic transition to an equitable, net zero and sustainable future is both one of the most pressing challenges and greatest responsibilities we have in front of us as a society today. More than ever, investors and companies seek evidence-based insights, high quality data and advanced analytics to support their investment strategies when linking sustainability and business performance. One of the most important tools that companies and investors utilize to assess sustainability performance is an ESG score. An ESG score is typically a headline number that presents the provider’s opinion of a company or entity’s performance against pre-defined ESG criteria.
Company engagement, consistent, comparable, and assured disclosures, and rigorous analysis are the vital building blocks for robust ESG scores. At present ESG disclosures by companies can be inconsistent, leading to data gaps that need to be interpreted or modeled in order to present the most comprehensive view available at that point in time. Fortunately, we are seeing an evolution here, as an increasing number of jurisdictions are mandating disclosure of ESG factors, in particular climate, which will hopefully make disclosure more consistent and widespread.
As we see the ESG market grow and continue to evolve, I would argue two specific elements of an ESG score will be essential to unlocking further growth, progress on sustainable goals, and market confidence: transparency and impact.