Setting the scene
Sustainability criteria have become essential components of today’s business strategies and investor workflows. We saw evidence of the growing importance of environmental, social and governance (ESG) factors in the 2022 S&P Global Corporate Sustainability Assessment (CSA): More than 3,000 firms representing half of global market capitalization relative to the S&P Global Broad Market Index participated in the CSA, which is a key input to the S&P Global ESG Score.
As the market focus on ESG has grown, we have also seen moves to create consistent global sustainability reporting standards — for example, via the establishment of the International Sustainability Standards Board (ISSB) created by the IFRS Foundation.
But at present, company disclosures around sustainability topics can be inconsistent, leading to gaps in the data. To address this challenge and to meet our clients’ needs for a holistic overview of corporate sustainability performance, we are evolving our approach to S&P Global ESG Scores.
A two-pronged approach
The S&P Global ESG Score includes modeling approaches
The S&P Global ESG Score measures a company’s performance on and management of material ESG risks, opportunities and impacts. The CSA is the main source of information underpinning S&P Global ESG Scores.
Honed since 1999, the CSA is our proprietary research process to evaluate the sustainability practices of more than 13,000 companies from around the world. It covers 62 industries via industry-specific questionnaires that assess on average 23 sustainability topics in 100 questions. Based on their performance, companies receive scores ranging from zero to 100.
The CSA can be completed in one of two ways: Firms either participate directly, submitting in-depth data and supporting evidence — including internal documentation additional to public disclosures, where relevant. Or, for companies that do not participate, a team of analysts at S&P Global Sustainable1 fills in the assessment questionnaires using publicly available information.
The CSA has historically assigned the minimum possible value of zero to questions that are unanswered or where the data is not publicly disclosed, thus taking a conservative approach to scoring in the absence of disclosure. But assigning zero to undisclosed questions has limitations, which we seek to address with a key methodology update to scores calculated from the 2023 CSA: We will now apply modeling approaches where disclosure is unavailable.
The goal here is to provide the most robust and holistic assessment of a company’s sustainability performance. Modeling approaches will be included from the Methodology Year 2023 onwards for all companies, but 10 years’ history will be available.
This modeling approach will be applied consistently for all companies within our Research Universe of more than 13,000 companies, including both companies that participate in the CSA and those that don’t.
How we are applying modeling
While many data providers rely solely on public disclosures, the CSA is built around an engaged approach with companies. This engagement continues to be much more than a data collection method — it is the very foundation of how we think about sustainability. Company disclosure and transparency continue to be key drivers of the robustness of our data and resulting scores.
We will still provide an analysis of corporate sustainability performance that does not use modeling. This will be called the S&P Global CSA Score, and it’s the S&P Global ESG Score without the inclusion of any modeling approaches. For the S&P Global CSA Scores, questions with missing disclosure receive a score of zero.
The S&P Global CSA Score will be a key component of the S&P Global ESG Score. The S&P Global ESG Score will include modeling approaches — but not for all questions.
More than 40% of underlying questions in the CSA require publicly available data to score any points. For the S&P Global ESG Score, no modeling is applied to questions where underlying data is required to be in the public domain, and therefore no points will be granted to a company should this information not be available.
The remaining questions in the CSA do not require information to be publicly disclosed to score points, but additional points can be granted to companies that do so. If no information is disclosed by the company on such questions, the question-level score is modeled, excluding the points attributed for transparency.
The goal of this two-pronged approach is to answer needs for corporate benchmarking, year-on-year comparisons and specific investor use cases.
Learn More
This blog is just a brief introduction to changes in our methodology. We hope you will read our full Methodology document here to learn more about our approach to scoring. We also invite you to tune into our webinar on Aug. 23 to learn more about the changes.
You can access S&P Global ESG Scores and more information about the S&P Global Corporate Sustainability Assessment (CSA) here.