Disclaimer

This is to inform that by clicking on the hyperlink, you will be leaving sc.com/sg and entering a website operated by other parties.

Such links are only provided on our website for the convenience of the Client and Standard Chartered Bank does not control or endorse such websites, and is not responsible for their contents.

The use of such website is also subject to the terms of use and other terms and guidelines, if any, contained within each such website. In the event that any of the terms contained herein conflict with the terms of use or other terms and guidelines contained within any such website, then the terms of use and other terms and guidelines for such website shall prevail.

Thank you for visiting www.sc.com/sg


Proceed
Face, Graphics, Art

ESG Ratings: your questions answered

Our Q&A will help you understand how ESG ratings are calculated and how they are used.

Here we break down what an ESG rating is, how they are used and the impact they will have for the asset management industry.

What is an ESG rating?

An ESG rating is assigned to a company and is an evaluation of its focus and direction when it comes to environmental, social and governance (ESG) issues.

This rating factors in how well the company proactively manages ESG issues that are most material to its business.

Many investment managers and third-party firms have devised their own ESG ratings and framework, which are generally based on a grading or risk scale.

How is an ESG rating determined?

Companies span many different sectors, so most third-party ESG ratings are assessed against a set of industry-specific criteria, relative to their peers. These include material ESG factors that can impact stakeholder value for the company.

Those investment firms with a large research team and the depth of corporate access can gain unique insight into a company’s ESG performance and progress, and rate them accordingly.

These ratings are updated regularly, which allows analysts to monitor progress or deterioration against set goals and update their assessment.

What type of company would receive a high ESG rating?

Attributes that may allow a company to receive a high ESG rating could include:

–   regularly disclosing relevant ESG information

–   having effective management systems in place to address ESG risks

–   not being involved in significant ESG controversies or risk events

–   having strong management oversight and understanding of material ESG risks and opportunities.

How do ESG ratings provide insight to investment managers?

When ESG ratings are built on the back of a large investment research network with access to senior management, they provide a unique insight into how corporates are performing on ESG-related issues.

If these insights are built into their analyst ratings system, it can help investment managers by:

–   providing a forward-looking view of factors that are influencing a company’s ESG performance and direction

–    identifying which companies are following best practice, and which are laggards

–    not being involved in significant ESG controversies or risk events

–     allowing them to consider the non-financial risks and opportunities associated with sustainable investing.

Research shows that companies that follow ESG best practice are more likely to perform better in the long run – and identifying these companies can help investment managers to build and protect investment returns for investors.

This article is written by Fidelity International.

Disclaimer

This article is for general information only and it does not constitute an offer, recommendation or solicitation of an offer to enter into any transaction or adopt any hedging, trading or investment strategy, in relation to any securities or other financial instruments, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration. This article has not been prepared for any particular person or class of persons and it has been prepared without regard to the specific investment objectives, financial situation or particular needs of any person, and does not constitute and should not be construed as investment advice nor an investment recommendation. Where the article describes any insurance product or service, it also does not constitute an offer, recommendation or solicitation of an offer to buy or sell any insurance product or service, nor is it intended to provide insurance or financial advice. You should seek advice from a licensed or an exempt financial adviser on the suitability of a product for you, taking into account these factors before making a commitment to purchase any product. In the event that you choose not to seek advice from a licensed or an exempt financial adviser, you should carefully consider whether the product is suitable for you.

Standard Chartered Bank (Singapore) Limited (the “Bank”) will not accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information herein. The Bank makes no representation or warranty of any kind, express, implied or statutory regarding this article or any information contained or referred to in this article. This article is distributed on the express understanding that, whilst the information in it is believed to be reliable, it has not been independently verified by the Bank.

The named contributor to the article (the “Contributor”) does not assume any duty to update any opinions or forward-looking statements, which are based on certain assumptions of future events and information available on the date hereof. There can be no assurance that forward-looking statements, if any, will materialise or the intended objectives or targets can be achieved. Whilst great care has been taken to ensure that the information contained herein is accurate and the data or information supplied by outside sources are reliable, the Contributor does not accept any responsibility or liability of any kind, with respect to the accuracy or completeness of the information herein. The distribution/dissemination of this article in certain jurisdictions may be restricted by law. The Contributor shall not be held liable as to how and where the Bank chooses to distribute or disseminate the article, in the event that the Bank acts or omits to act in willful default of the Contributor’s written notice to the Bank regarding such distribution or dissemination. Persons into whose possession this article may come are required to inform themselves of and comply with any relevant restrictions. Receipt of this article does not constitute an offer or solicitation by the Contributor in any jurisdiction in which such an offer is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. The Contributor does not purport that it is duly licensed or registered to offer financial services of any kind in such jurisdictions.