August 2020
THE ESG 
RISK RATING:
FREQUENTLY ASKED QUESTIONS –  
FOR COMPANIES

© Sustainalytics 2020 
 
 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Copyright ©2020 Sustainalytics. All rights reserved. 
 
The information, methodologies, data and opinions contained or reflected herein are proprietary of 
Sustainalytics and/or its third-party suppliers (Third Party Data), are provided for informational purposes 
only and may be made available to third parties provided that appropriate citation and acknowledgement 
is ensured. They do not constitute an endorsement of any product or project, nor an investment advice 
and are not warranted to be complete, timely, accurate or suitable for a particular purpose. Their use is 
subject to conditions available at https://www.sustainalytics.com/legal-disclaimers/.

Click on heading in table to jump to that section: 
About Sustainalytics’ ESG Risk Ratings 
1 
What are Sustainalytics’ ESG Risk Ratings and what do they measure? 
1 
What are the ESG Risk Rating risk categories? 
1 
When did Sustainalytics Introduce the ESG Risk Rating to its investor clients? 
1 
ESG Risk Ratings Methodology 
2 
What is a Material ESG Issue (MEI)? 
2 
What is the Definition of Exposure to ESG Risk? 
2 
What is the Definition of Management of ESG Risk? 
2 
What is the best way to interpret the Management Score? 
2 
What is Unmanaged Risk? 
3 
How does Sustainalytics define “materiality” for the ESG Risk Ratings? 
3 
What is an issue “beta”? 
4 
What is Idiosyncratic Risk? 
4 
Is Sustainalytics’ Corporate Governance Rating incorporated into the ESG Risk Rating? 
4 
About our Research Feedback Process 
5 
How often will the ESG Risk Rating be updated? 
5 
Can Companies Provide Feedback during the Annual Update Process? 
5 
How Can a Company Log In to Sustainalytics’ company portal - the Sustainalytics Issuer Gateway? 5 
Is there a deadline for feedback to be provided from an issuer to Sustainalytics? 
5 
What happens if a company misses the feedback deadline? 
6 
How can a Company review its ESG Risk Rating and scoring details? 
6 
How should an issuer contact Sustainalytics? 
6 
Additional Questions 
6 
How is Sustainalytics research universe determined? 
6 
What is the difference between the Comprehensive Rating Framework and the Core Rating 
Framework? 
6 
What is a subindustry and how many are there? 
7 
How does the overall company score for the ESG Risk Rating differ from the overall company score 
for the legacy ESG Rating? 
7 
Where can I find the peer group ranking and percentile metrics in the ESG Risk Ratings? 
7

© Sustainalytics 2020 
 
 
1 
ABOUT SUSTAINALYTICS’ ESG RISK RATINGS 
 
What are Sustainalytics’ ESG Risk Ratings and what do they measure?  
 
Sustainalytics’ ESG Risk Ratings are designed to help investors identify and understand financially material 
ESG risks at the security and portfolio level and how they might affect the long-term performance for 
equity and fixed income investments.  
The ESG Risk Ratings are based on a two-dimensional materiality framework that measures a company’s 
exposure to industry-specific material ESG risks and how well a company is managing those ESG Risks.  
Sustainalytics ESG Risk Ratings places companies into five risk categories: 
• 
Negligible 
• 
Low 
• 
Medium 
• 
High 
• 
Severe 
These risk categories are absolute, i.e. comparable across sectors.  
What are the ESG Risk Rating risk categories?  
 
A company’s ESG Risk Rating score is assigned to one of five risk categories:  
• 
Negligible Risk (Overall Score of 0-9.99 points): Enterprise value is considered to have a negligible 
risk of material financial impacts driven by ESG factors  
• 
Low Risk (10-19.99 points): Enterprise value is considered to have a low risk of material financial 
impacts driven by ESG factors  
• 
Medium Risk (20-29.99 points): Enterprise value is considered to have a medium risk of material 
financial impacts driven by ESG factors.  
• 
High Risk (30-39.99 points): Enterprise value is considered to have a high risk of material financial 
impacts driven by ESG factors.  
• 
Severe Risk (40 and higher points): Enterprise value is considered to have a severe risk of 
material financial impacts driven by ESG factors  
 
When did Sustainalytics introduce the ESG Risk Rating to its investor clients? 
 
Sustainalytics introduced the ESG Risk Rating to our clients in September 2018.

© Sustainalytics 2020 
 
 
2 
ESG RISK RATINGS METHODOLOGY 
 
What is a Material ESG Issue (MEI)? 
 
A material ESG issue (MEI) is the core building block of the ESG Risk Rating. For Sustainalytics, an ESG issue 
is material if it is likely to have a significant effect on the enterprise value of a typical company within a 
subindustry, and if the presence or absence of an MEI in financial reporting is likely to influence the 
decisions made by a reasonable investor.  
Material ESG issues for each subindustry are selected by Sustainalytics Risk Rating research team. All 
companies assigned by Sustainalytics to a subindustry category are assessed on how well they are 
managing their exposure to these MEIs.   
If a MEI is not relevant to a specific company’s business model, then it may be disabled. 
Note that no specific predictions about financial impacts at the company level are implied by the presence 
or absence of an issue as a material ESG issue. 
What is the definition of Exposure to ESG Risk?  
 
Exposure to ESG Risk is determined by a set of ESG-related risk factors that pose potential financial risks 
for companies. Very low exposure to an ESG risk suggests an issue is not material to a company; higher 
exposure suggests the issue is material.  
What is the definition of Management of ESG Risk?  
 
Management of ESG Risk is determined by Sustainalytics assessments of management policy 
commitments related to an ESG risk, programs designed to implement those policy commitments, the 
availability of quantitative performance data measuring how well the programs have met stated targets, 
and how well a company is managing its involvement in related ESG controversies. 
What is the best way to interpret the Management Score?  
 
For each MEI, the management score is a weighted sum of the management indicator scores and scored 
on a 0-100 scale. 
Each MEI Management Score measures what percentage of a firm’s manageable risk has been managed.  
For example, assuming all a firm’s exposure to risk is manageable (see unmanageable risk), then an MEI 
management score of 80 means for that MEI, the company has managed 80% of its exposure to risk.

© Sustainalytics 2020 
 
 
3 
What is Unmanaged Risk? 
 
The ESG Risk Rating scoring model has three scoring components for each MEI: 
1. Exposure 
2. Management 
3. Unmanaged Risk 
a. Unmanageable Risk 
b. Manageable Risk 
The overall ESG Risk Rating score represents the overall material ESG risk that has not been managed by 
a company.  
It includes two types of risk:  
• 
unmanageable risk i.e., which cannot be addressed by company initiatives. 
• 
the management gap, which represents risks that could be managed by a company through 
suitable initiatives, but which are not yet managed.  
Below are the key measurement components for the ESG Risk Ratings. 
 
 
How does Sustainalytics define “materiality” for the ESG Risk Ratings? 
 
An issue is material within the ESG Risk Rating if its presence or absence in financial reporting is likely to 
influence the decisions made by an investor. To be selected as a material ESG issue (MEI) an issue must 
have a potentially substantial impact on the economic value of a company and, hence, the financial risk 
and return profile of an investor investing in the company.

© Sustainalytics 2020 
 
 
4 
 
It is important to distinguish the ESG Risk Rating’s use of materiality as a concept from narrower legal or 
accounting-focused definitions. Not every issue we consider as material in the rating is legally required to 
be disclosed in company reporting.  
 
Note that an underlying premise of the ESG Risk Rating is that the world is transitioning to a more 
sustainable economy, and that superior management of ESG risks should in general be associated with 
superior long-term enterprise value, ceteris paribus.  
 
Assessments of materiality within the ESG Risk Rating are in part qualitative and require judgement, which 
has been provided by our experienced sector research teams in a structured and guided process. Some 
issues are material from an ESG perspective even if the financial consequences are not fully measurable 
today. 
 
What is an issue “beta”? 
 
An issue beta is a factor that assesses the degree to which a company’s exposure deviates from its 
subindustry’s exposure on a material ESG issue. It is used to derive a company-specific issue exposure 
score for a material ESG issue. It ranges from 0 to 2, with 0 indicating no exposure, 1 indicating the 
subindustry average, and 2 indicating exposure that is twice the subindustry average.   
 
What is Idiosyncratic Risk? 
 
Idiosyncratic Risk is additional exposure to risk caused by an issue that was not deemed material at the 
subindustry level but becomes a material ESG issue for a company based on the occurrence of a Category 
4 or 5 event.   
 
Is Sustainalytics’ Corporate Governance Rating incorporated into the ESG Risk 
Rating?  
 
Yes. The six corporate governance pillars found in our Corporate Governance Rating form the baseline of 
our ESG Risk Rating. These pillars include: board and management quality and integrity; board structure; 
ownership and shareholder rights; remuneration; financial reporting; and stakeholder governance. Our 
ESG Risk Rating includes a comprehensive view of a company’s governance structures, practices, decision-
making and behaviors, and events.

© Sustainalytics 2020 
 
 
5 
ABOUT OUR RESEARCH FEEDBACK PROCESS 
 
How often will the ESG Risk Rating be updated?  
 
Research on management indicators is updated annually. ESG Controversy research is updated as events 
occur. Structural adjustments to the rating (e.g., selection of material ESG issues, weighting of indicators) 
are done annually. 
 
Can companies provide feedback during the annual update process? 
 
Yes. Sustainalytics contacts issuers in our comprehensive universe to solicit feedback as part of our annual 
update of the ESG Risk Rating Report. Issuers are asked to log into our company portal – the Sustainalytics 
Issuer Gateway – to download and review a draft version of the report and to provide any additional 
information if appropriate. 
 
How can a company log in to Sustainalytics’ company portal – the Sustainalytics 
Issuer Gateway? 
 
We invite you to access our company portal - the Sustainalytics Issuer Gateway - where you will find the 
following: 
  
• 
a complimentary copy of the Sustainalytics ESG Risk Ratings Report (comprehensive universe 
only) 
• 
FAQ and methodology documents concerning the ESG Risk Rating  
• 
Annual update schedule and draft feedback reports (during annual update cycle – 
comprehensive universe only) 
• 
Information on the products and services offered to companies by our Sustainable Finance 
Solutions unit. 
 
To access the Sustainalytics Issuer Gateway, please go to: https://issuergateway.sustainalytics.com/ 
 
If you have any questions, please contact the Sustainalytics Issuer Relations Team: 
issuer.relations@sustainalytics.com 
 
Is there a deadline for feedback to be provided from an issuer to Sustainalytics? 
 
Issuers are given two weeks to review the accuracy and completeness of the data collected. If issuers 
provide feedback within the allotted time frame, then this information is reviewed by the analyst prior to 
the release of the updated report to Sustainalytics’ clients. Information provided after this deadline will 
be processed but the timing of the update will be variable. Deadline extensions are also available.

© Sustainalytics 2020 
 
 
6 
What happens if a company misses the feedback deadline? 
 
If an issuer does not respond within two weeks, the updated ESG Risk Rating Report is published without 
feedback. If the issuer ultimately provides feedback, Sustainalytics will integrate relevant data as soon as 
possible and republish the ESG Risk Rating Report. 
 
How can a company review its ESG Risk Rating and scoring details? 
 
For companies in the Comprehensive ratings framework, please access our company portal – the 
Sustainalytics Issuer Gateway – where you will find the following: 
  
• 
a complimentary copy of the Sustainalytics ESG Risk Ratings Report (comprehensive universe 
only) 
• 
FAQ and methodology documents concerning the ESG Risk Rating  
• 
Annual update schedule and draft feedback reports (during annual update cycle – 
comprehensive universe only) 
• 
Information on the products and services offered to companies by our Sustainable Finance 
Solutions unit. 
 
To access the Sustainalytics Issuer Gateway, please go to: https://issuergateway.sustainalytics.com/ 
 
For companies in the Core ratings framework, please request your ESG Risk Rating report from the 
Sustainalytics Issuer Relations Team: issuer.relations@sustainalytics.com 
 
If you have any questions, please contact the Sustainalytics Issuer Relations Team: 
issuer.relations@sustainalytics.com 
 
How should an issuer contact Sustainalytics? 
 
If you have any questions, please contact the Sustainalytics Issuer Relations Team: 
issuer.relations@sustainalytics.com 
 
ADDITIONAL QUESTIONS 
 
How is Sustainalytics research universe determined? 
 
Sustainalytics Risk Ratings universe covers over 12,000 companies. Our research universe is determined 
by 25-30 major global and regional equity and fixed incomes indices.  
 
What is the difference between the Comprehensive Rating Framework and the 
Core Rating Framework? 
 
The Comprehensive Rating Framework: 
• 
Companies covered by the Comprehensive Rating Framework are primarily large and medium 
cap companies.

© Sustainalytics 2020 
 
 
7 
• 
The Comprehensive Framework assesses between 70-90 management indicators per issuer.  
• 
These indicators are selected by relevance both to the assigned peer group (a subindustry in 
Sustainalytics industrial classification system) and to the particularities of a company’s business 
model. 
• 
In the Comprehensive Rating Framework, the overall Risk Rating score is the summation of the 
scores on 3 to 10 material ESG issue risk ratings scores. 
 
 
The Core Rating Framework: 
• 
Companies covered by the Core Rating Framework are primarily small cap companies.   
• 
The Core Rating Framework assesses between 20-30 management indicators per issuer. 
• 
Core Ratings framework management indicators are chosen for their predictive ability to signal 
an issuer’s performance on managing key ESG issues. By evaluating a select set of indicators, we 
are able provide a high-level assessment of a company’s overall management of ESG risks that is 
directly comparable to assessments of similar companies in the Comprehensive Ratings 
Framework.    
• 
In the Core Rating Framework, the overall Risk Rating score is NOT derived from separate MEIs 
risk rating scores but calculated at the company level. 
 
What is a subindustry and how many are there? 
 
Sustainalytics has its own industry classification system that categorizes companies into peer groups.  This 
classification is based on an assessment of business operations, products and services, and takes into 
account common environmental, social and governance challenges. 
 
As of August 2020, Sustainalytics had created 138 peer groups – “subindustries” – that are placed into 42 
distinct “industries”. 
 
How does the overall company score for the ESG Risk Rating differ from the 
overall company score for the legacy ESG Rating? 
 
Although both scores use a range of 0-100, a lower score in the ESG Risk Rating is better than a higher 
score, whereas for the ESG Rating a higher score is better than a lower score. 
It is important to keep in mind that the scores were designed to capture different dimensions of a 
company’s ESG performance. The ESG Risk Rating score reflects how much of a company’s exposure to 
ESG risk is unmanaged. The ESG Rating score reflects how well a company is managing its material ESG 
issues. 
Where can I find the peer group ranking and percentile metrics in the ESG Risk 
Ratings? 
 
Sustainalytics lists the overall universe, industry (equivalent of peer group in the ESG Rating) and 
subindustry rankings and percentiles in the subindustry overview section on page one of the ESG Risk 
Rating report.