Environmental, Social and Corporate Governance Evaluation System (ESG evaluation system), also known as ESGRatings, was created by commercial and non-profit organizations to evaluate how the commitment, performance, business model and structure of enterprises are consistent with sustainable development goals.
They are first used by investment companies to screen or evaluate companies in various funds and portfolios. Job seekers, customers and others can also use these ratings when evaluating business relationships, and the rated companies themselves can better understand their strengths, weaknesses, risks and opportunities.
Workflow of ESG evaluation system
The workflow of ESG rating mainly consists of three parts: first, data collection and information induction; Second, set indicators, rate and form rating results; Third, the rating results are indexed, thus forming service investment products. A rating agency may carry out the whole process mentioned above, or it may only participate in a part of it.
Because there is no uniform definition and disclosure standard for ESG, rating system often forms an evaluation system according to ESG disclosure standards such as Global Reporting Initiative (GRI) and Sustainable Development Accounting Standards Committee (SASB), and according to industry classification such as MSCI or Shenwan.
The ESG evaluation system takes environment, society and corporate governance as the core, and is divided into three or four levels of specific indicators for scoring.