S-PGlobalDisclosureAnalysisBrochure

S&P Global ESG Scores Disclosure Analysis Disclosure Analysis Introduction ESG Scores are becoming increasingly sophisticated as information serves to address a number of key concerns that underlying metrics mature and scoring methodologies reflect current users of ESG information have: a broader range of analytical inputs. Although corporate • What are the reasons for a company scoring low? Is it disclosures on ESG are also becoming increasingly robust, because a company has performed poorly in the ESG there are still significant gaps in corporate disclosures across analysis or because of a lack of disclosure? a growing universe of researched companies – and these gaps are only becoming more pronounced as ESG scores • What are the main areas of E, S and G where companies cover companies of differing sizes and geographies. Bringing do not sufficiently report ESG information compared to transparency to investors on data availability and gaps in their peers? reported information is therefore key. • What is the contribution of actual reported data to the overall ESG score, in context of the underlying assessment S&P Global has launched its “Disclosure Analysis” reporting methodology with regards to required public disclosure and on the Capital IQ Pro platform to provide additional color additional disclosure provided by companies? and context to the S&P Global ESG scores. This additional Disclosure Analysis at the dimension and underlying levels will only be available in a future release. S&P Global ESG Scores The S&P Global ESG Scores are built on the Corporate There is increasing pressure on corporates to publicly Sustainability Assessment (CSA) framework, a research disclose ESG information in order to drive more methodology that has been developed over more than 20 transparency for investors and other stakeholders. years to assess companies not only their ESG performance Regulatory developments around the world are establishing and management of financially relevant ESG issues. The CSA mandatory reporting of the most important and relevant ESG uses a data-driven, quantitative approach to assessing ESG topics for a large number of publicly listed companies. In the information rather than solely trying to assess availability spirit of these developments, a specific set of metrics in the of disclosed ESG information. The latter may often not be CSA require publicly available information to be disclosed in relevant to investors, very qualitative in nature and therefore order to score any points. These CSA questions are referred difficult to compare, or may be inaccurate. As a result, to as Requiring Public Disclosure. Disclosure on topics the CSA has used a dual approach to collecting relevant like Corporate Governance, Climate Strategy, or Human ESG information by supplementing public disclosure with Rights is expected by a growing number of stakeholders. additional information provided directly by companies. Public These questions represent about one-third of the questions data is used only if it meets the stringent data requirements covered in the CSA methodology. The remaining questions that have been refined over two decades, understanding that are identified as requiring Additional Disclosure. These ESG data must always be reviewed on quality and context questions split into those that reward companies with rather than just on availability. Companies participating additional points for public disclosure, but where it is in the CSA have the option to supplement their public not a requirement. The remaining set of questions allow disclosure, allowing for more granular and robust information companies to report internal information and supporting to be collected. As a result, the S&P Global ESG scores of documents. This approach of the CSA promotes increasing companies actively participating in the assessment are not disclosure, while allowing to cover topics that are emerging only a reflection of what a company has chosen to disclose and underreported today. It also allows to assess companies in its publicly, which is designed to meet the needs of a on sensitive topics like cyber security or remuneration broad range of stakeholders, dive deeper into metrics and and diversity related topics as well as topics where a lack quantifiable values that can help inform a more nuanced of ESG reporting standards holds companies back from scoring approach and peer benchmarking. reporting publicly. PAGE 3 Disclosure Analysis S&P Global ESG Scores The Disclosure Analysis feature on the S&P Global Capital IQ • Reporting quality on essential ESG topics that should be Pro platform allows investors to quickly identify a company’s disclosed by all companies, regardless of the geography overall disclosure transparency as well as well as the quality they are headquartered in or their size. This gives an of that disclosure split into questions that require public indication of how well companies are reporting on the disclosure and those where the company provide additional core ESG topics that are featured in many ESG disclosure disclosure. This way it is possible to understand: standards and are being discussed by regulators around • The overall level of reporting for a company vs. its industry the world. peers, as a quick indicator of ESG leaders and laggards in • How much data companies are reporting on beyond what terms of transparency. many investors would consider the bare minimum today? • The material E, S, and G areas where a company is This provides an indication of how well-prepared companies disclosing less than its peers. For highly weighted ESG are to report to a growing number of requests across a wide areas, low disclosure can signal that a company is not range of ESG by stakeholders in their public disclosures. adequately reporting on key, financially relevant topics. • Understanding whether a low score is a result of insufficient disclosures or poor performance on reported information. Methodology and Technical Approach The Disclosure Analysis methodology is designed to analysis is done at the completion of the yearly CSA cycle highlight key facts about the data assessed in the CSA. It based on data that has been collected in the public domain differentiates between data availability and data quality, and and supplemented by additional companies’ disclosure provides insights into the score potential that each company through their engagement in the CSA process. has by improving public and additional disclosure. The How to interpret the chart The length of the blue bars reflects the overall weight/ relevant for scoring as per the CSA methodology. In the score of questions in the CSA that make up the S&P Global example above, the company in question received 8 of the ESG Score that require publicly available information.. In possibly 68 points for these questions. the example above, these questions account for 32 of the maximum 100 points that can be achieved in this industry. The relative weight of the questions requiring public The black and grey bars reflect the weight/score of questions information and those that are classified as additional not requiring publicly available information for which at disclosure differs by industry as the CSA applies 61 least some information was available, and more importantly, industries-specific methodologies Disclosure Analysis at the dimension and underlying levels will only be available in a future release. Data Availability The data availability shows the aggregate disclosure level of In situations where there are less than 10 companies for a company compared to its industry peers. Disclosure levels which data exists, the reporting level has been reported are divided into 5 quintiles, Very Low, Low, Medium, High and across the full set of 61 industries. Very High. This is also calculated separately for questions requiring public disclosures and those where additional Based on this example, the company has medium disclosure disclosures are accepted. compared to its industry peers. Potential Score Contribution This value describes the maximum overall score a company points. If all disclosed information had been relevant for the could have achieved, if all disclosed information would have CSA, resulting in the highest possible score in each question, met the requirements of the CSA methodology, resulting in a the company could have scored a maximum of 35 out of 100. score of 100 for each of the question. The gap of 9 points to the actual score of 26. could be attributed to poor CSA performance on the ESG In the example above, the available information for the topics disclosed by the company rather than a lack of company resulted in a score of 26 out of a maximum 100 disclosure on these topics. Disclosure Level Score Contribution: The score contribution section provides detail on the relative contribution of each ESG dimension as it relates to questions “requiring public information” and those that are grouped under “additional disclosure”. PAGE 5 CONTACT US The Americas Europe. Middle East and Africa Europe. Middle East and Africa +1 800 402 8774 +44 (0) 20 7160 9800 +65 6597 6158 sustainable1@spglobal.com sustainable1@spglobal.com sustainable1@spglobal.com General CSA Resources: http://spglobal.com/esg/csa About S&P Global Sustainable1 S&P Global Sustainable1 is the central source for sustainability intelligence from S&P Global. Sustainable1 matches customers with the ESG products, insights and solutions from across S&P Global’s divisions to help meet their unique needs. Our comprehensive coverage across global markets combined with in-depth ESG intelligence provides financial institutions, corporations and governments an unmatched level of clarity and confidence to successfully navigate the transition to a sustainable future. Our data and well-informed point of view on critical topics like energy transition, climate resilience, positive impact and sustainable finance allow us to go deep on the details that define the big picture so customers can make decisions with conviction. To learn more about Sustainable1, visit www.spglobal.com/sustainable1. About S&P Global S&P Global (NYSE: SPGI) is the world’s foremost provider of credit ratings, benchmarks and analytics in the global capital and commodity markets, offering ESG solutions, deep data and insights on critical economic, market and business factors. We’ve been providing essential intelligence that unlocks opportunity, fosters growth and accelerates progress for more than 160 years. Our divisions include S&P Global Ratings, S&P Global Market Intelligence, S&P Dow Jones Indices and S&P Global Platts. For more information, visit www.spglobal.com. Copyright © 2021 by S&P Global Inc. All rights reserved. These materials have been prepared solely for information purposes based upon information generally available to the public and from sources believed to be reliable. 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