MSCI ESG Research then conducts further research to assess actual performance, looking for instances where companies are involved in major controversies or have breached the standards set by the UN Global Compact, ILO, or other international bodies. The research and ratings process progresses through four steps:

• Industry analysis to determine key issues for each sector
• Data collection from media, government and NGO sources, as well as company disclosure
• Final rating and analysis of company performance relative to sector peers
• Review and confirmation by a committee of senior analysts, to ensure the consistent quality of the MSCI ESG Impact Monitor product

MSCI ESG Research uses a three-tiered ratings code to enable comparative analysis of the ESG risk profiles of each covered company. A summary of the ratings code:

indicates that if a company has strategies in place, these are likely to be sufficient to avoid risk of non-compliance with international norms; or if there is a lack of suitable strategies, this is unlikely to be of significant concern given the sector of operation. Ratings can also be affected by geographical and political context.

indicates that even if a company has strategies in place, these may not be sufficient to avoid risk of non-compliance with international norms; or if there is a lack of suitable strategies, this is potentially of some concern given their sector of operation. Ratings can also be affected by geographical and political context.

represents potentially serious strategic shortcomings and are issued on a case-by-case basis, irrespective of sector intensity. Ratings can also be affected by geographical and political context.

Global Compact 10 Principles

Human Rights

• Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
• Principle 2: make sure that they are not complicit in human rights abuses. 

Labor

• Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
• Principle 4: the elimination of all forms of forced and compulsory labor;
• Principle 5: the effective abolition of child labor; and
• Principle 6: the elimination of discrimination in respect of employment and occupation. 

Environment

• Principle 7: Businesses should support a precautionary approach to environmental challenges;
• Principle 8: undertake initiatives to promote greater environmental responsibility; and
• Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

• Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.