A growing number of service providers offer data services for ESG ratings and scores. Big Data contributes to a vast universe of data. AI is put in use to roam and analyze this data universe.
Depending on the service provider, the data sources that contribute to ESG ratings may derive from media, news and headlines, corporate filings, or dedicated ESG reporting. Additional data, for example, related to environmental factors (geolocation, risks of natural disasters like floodings, water scarcity, etc.) can also influence ratings and scores. Think about a company in the agricultural sector that depends on precipitation or a company located close to a river delta where flooding occurs more often caused by climate change.
Risks and opportunities – both come with a price tag. For example, what are the ESG issues that may harm a companies performance? One could also look for opportunities related to ESG that give an advantage compared to peers.
Understanding ESG ratings is a vital step when rating and score improvement is your goal.