Wiesbaden, April 30, 2021. Your ESG rating can be decisive on whether investors give your company money or not. This means, that it is even more important to strive for a good rating. It takes some work – but it’s worth it.

by Michael Diegelmann

So-called ESG rating agencies and their ratings are not without controversy, but investors nevertheless rely on the ratings assigned by, for example, MSCI ESG, ISS ESG or Sustainalytics. These agencies use special algorithms or analysts to evaluate companies’ ESG data, such can for example be found in the ESG report. They vary greatly in their selection of criteria and topics, which is why companies can sometimes perform very well, sometimes very poorly, depending on the rating agency and their own priorities.

Tackle your ESG ratings!
Of course, it takes some time to invest in a sustainable ESG rating improvement – but given the positive effects, it is definitely worth the effort! The following four steps will help you improve your rating at as many rating agencies as possible:

1. 1. Analysis
   Not only get an overview of which criteria the agencies ask for, but also note which ones have the most impact on the ESG rating and which ones you can meet easily. Decide which criteria you are willing and able to implement in the short to long term. In the end, if you can just put all the feasible measures into a suitable form in the sustainability report, you will have already gained a lot.
2. 2. Stakeholder dialogue
   Not every single ESG topic is relevant for all companies. You can determine which topics are particularly important for your company with the help of a materiality analysis. This is time-consuming the first time, as you have to interview various stakeholders, but you can then credibly demonstrate that certain topics are of little or great relevance to you and your company.
3. 3. ESG report
   Make it easy for algorithms and analysts and phrase your ESG report according to one of the common frameworks such as GRI (Global Reporting Initiative) and the SDG (Sustainable Development Goals). Also mention criteria that you do not (yet) implement or that do not apply to your business model, as gaps will worsen your score. Also prepare the data in clear tables for your website – this way you make it easier for the agencies’ algorithms to find your data.
4. 4. Contact
   The final step: take a close look at your ratings, because even rating agencies can overlook information or make mistakes. If that’s the case, don’t be afraid to contact the agencies to make corrections.

A transparent sustainability report offers many benefits – not only those of a good ESG rating and new investments. Companies take responsibility for their business and for their impact on ESG issues. So every company, whether listed or not, should have the issue on its radar and take action.

Do you want to improve your ESG rating? We will support you! Contact us here.

Michael Diegelmann: Founder and General Manager
Michael Diegelmann has gained experience in over 150 communications projects (IPOs, investor relations, M&A, crisis) and has been working in the field of capital market communications since 1997. He is the author of 16 book publications relevant to the capital markets and was previously project manager at an international consulting firm and a Frankfurt brokerage house.