Choosing The Right ESG Lens: Investors Sharpen Their Focus Intro
What are ESG ratings for? A decade ago, only a handful of investors understood and used them. Today, investors, companies, news media and the public all expect ESG ratings to help answer a multitude of questions, from whether a company is climate friendly or has a diverse workforce to how its risk profile fits within an investment strategy. But an ESG rating remains what it always was: a lens for looking at one specific dimension of the many ESG characteristics that stakeholders care about.
An ESG rating provides only one lens — a financial relevance lens that zooms in on questions of business resilience. That means answering other questions requires using other lenses. We explored some of these different lenses in the interactive chart below. If you’re figuring out a companies’ progress toward net-zero, try using a climate lens. If you’re pondering corporate diversity and equity, use the lens that focuses in on workforce and diversity data. And if you’re gauging whether a company has been damaging ecosystems or protecting them, then a green-tinged biodiversity lens would be your go-to.
Choose a lens that answers an ESG question; then (if applicable) choose how that lens changes with a specific industry; then click the colored boxes to see which ESG metrics we use to understand the lens’ impact on companies’ operations. The color of each box is dependent on whether the metric falls under the environmental, social, or governance lens. The precise name of the lens category can be seen directly under the graphic which changes based on the box selected.
Choosing The Right ESG Lens: Investors Sharpen Their Focus footnotes
Source: MSCI ESG Research LLC