Companies Increasingly Keep Tabs on Their Sustainability Scores

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By Andrea Vittorio

Firms that rate companies on their sustainability performance are noticing increased corporate interest in their work.

Raters such as MSCI Inc. and Sustainalytics B.V. credit the uptick to pressure from institutional investors that are paying more attention to how companies handle environmental, social, and governance (ESG) issues.

As companies get more ESG-related questions from investors, the raters get more questions from companies, too. “We think of ourselves, in some ways, as a conduit,” Linda-Eling Lee, MSCI’s global head of ESG research, told Bloomberg Law.

When MSCI rates companies, it reaches out to them to fact-check or update data. That kind of outreach is now being dwarfed by incoming inquiries.

The ratio of communication from companies compared with communication to companies has nearly tripled between 2014 and 2017, according to a MSCI report released Jan. 16. Lee said one thing companies usually want to understand is how much of their rating depends not just on data that’s voluntarily disclosed in corporate sustainability reports but on information collected from mandatory disclosure, enforcement databases, media, and other specialized data sources.

Higher Up

Fellow ESG rater Sustainalytics is getting so much corporate interest that, at the start of this year, it created a new role internally to lead “issuer relations.”

“The most striking increase that we’ve seen is the level at which we’re engaging with these companies,” Dayna Linley-Jones, who directs research at Sustainalytics, told Bloomberg Law.

Typically, Sustainalytics analysts reach out to a company’s sustainability or marketing department, she said. But it’s increasingly legal departments, corporate secretaries, and investor relations that are returning the rater’s calls.

Ratings Remit

Less than half of companies monitored their ESG ratings in 2015, according to a BNY Mellon survey of the investor relations industry. By 2017, about two-thirds of companies that engage with ESG investors said they follow such ratings.

“Historically, for some companies, that’s been a blindspot,” said Guy Gresham, head of the global investor relations advisory team in BNY Mellon’s depositary receipts group. The group works with companies from around the world that have secondary listings in the U.S., Europe, and elsewhere.

For a number of Gresham’s clients, the remit for engaging with ESG raters is falling on the investor relations team. “Now, it’s part and parcel to engaging with debt ratings agencies like Moody’s or Fitch,” he said.

To contact the reporter on this story: Andrea Vittorio in Washington at avittorio@bloomberglaw.com

To contact the editor responsible for this story: Yin Wilczek at ywilczek@bloomberglaw.com

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