Environmental, Social, and Governance QualityScores to be Reflected in ISS Proxy Research Reports
ROCKVILLE, M.D. (February 5, 2018) – Institutional Shareholder Services Inc. (ISS), a leading provider of governance and responsible investment solutions to the global financial community, today announced the launch of Environmental & Social QualityScore, a new component of ISS’ industry leading corporate profiling and scoring solution for institutional investors.
E&S QualityScore represents a data driven approach to measuring the quality of corporate disclosures on environmental and social issues, including sustainability governance, and to identify key disclosure omissions. Expectations regarding disclosure practices are defined by industry groups, based on the specific environmental and social risks identified in industry and multi-stakeholder initiatives and reflected in authoritative standards and recommendations from groups such as the Global Reporting Initiative, the Sustainability Accounting Standards Board and the Task Force on Climate-related Financial Disclosures.
Today’s launch covers an initial set of 1,500 companies across industries viewed as being most exposed to E&S risks, including: Energy, Materials, Capital Goods, Transportation, Automobiles & Components, and Consumer Durables & Apparel. An additional 3,500 companies spanning 18 industries will be added later in 2018, bringing the total coverage universe to more than 5,000 companies, globally.
“With this launch, we are extremely pleased to respond to the growing demand from our institutional investor clients for high-quality data and analytics covering environmental and social topics,” said ISS Chief Operating Officer, Stephen Harvey. “Investment professionals, who increasingly rely on extra-financial data and research for investment decision-making and portfolio risk mitigation, will benefit greatly when screening for companies where risks in operations, business, and supply lines are often latent.”
Underpinning E&S QualityScore are more than 380 unique environmental and social factors under analysis of which at least 240 apply to each industry group. Like its governance counterpart, E&S QualityScore provides a score for each company in its coverage universe that measures the company’s level of environmental and social governance disclosure risk, both overall and within eight broad categories. Broad topical areas under the E&S QualityScore methodology for environmental disclosures include: Management of Environmental Risks and Opportunities; Carbon and Climate; Natural Resources; and Waste and Toxicity. Meanwhile, Human Rights; Labor, Health, and Safety; Stakeholder and Society; and Product Safety, Quality, and Brand comprise topical areas for social-related disclosures.
An analysis of initial data underlying E&S QualityScore shows significant disparities in environmental and social disclosures by region, with European companies generally scoring far better on environmental factors compared with their peers in the Americas and Australasia.
“The launch of E&S QualityScore is an important milestone for institutions that turn to ISS for a fully integrated, global solution to aid in responsible investment portfolio construction,” said Marija Kramer, Head of ISS-Ethix, the responsible investment arm of ISS. “Clients will now enjoy access to timely and accurate data on portfolio companies alongside robust solutions and services, including policy development, screening, research, and engagement.”
Later this month, ISS’ benchmark policy proxy research reports will include the subject company’s top level scores under the E&S scoring methodology in addition to that for the company’s corporate governance.