ESG Risk Ratings vs ESG Impact Ratings

ESG Risk Ratings:

Focus: Measures the financial risks identified with a company's environmental, social, and governance performance.

Purpose: Helps investors understand how ESG might impact a company's financial stability and also its returns on investment.

Metrics: Contains risks concerning climate change, resource depletion, labor standards, and corporate governance.

ESG Impact Ratings:

Focus: Measures the positive and negative impacts a company has on the environment, society, and governance.

Purpose: Assess the overall impact of an organization towards sustainability and societal benefit.

Metrics: Carbon footprint reduction, contribution to community, and business ethics. Key Differences:

View: Risk-based ratings are investor-centric, based on financial risks while impact based ratings are impact-centric, focusing on the broader influence of a company. Ultimate

Goal: Risk ratings look forward to reducing financial risks, whereas impact ratings aim to create positive change and sustainability.

The ESG risk and impact ratings are very helpful information tools for investors and other stakeholders. Understanding the difference between them could be helpful in guiding more informed and responsible investment decisions.