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Rating Model Change 2.3

Jan 6, 2021

Topics January 6th Zurich Office and adjustments to the ESG rating model

Development and adjustments of the rating model

The rating model was expanded and recalibrated in accordance with the methodological developments and new features:

Expansion of the data basis, particularly in the area of financial service providers, by the introduction of additional business activities, which contributes to a more precise determination of the ESG impact;

    • More precise determination of the ESG impact, particularly in the financial area of retail banking;
    • Increased weighting of company-specific characteristics and peculiarities in the financial sector to improve the determination of the ESG impact – Changes in weightings for corporate governance indicators to more accurately determine ESG impact;
    • Changes in weightings for corporate governance indicators to more accurately determine ESG impact;
    • Expansion of the set of indicators in the area of corporate governance with regards to
      o development banks
      o the aerospace sector (transportation sector);
    • Improved recording of minority interests in companies that conflict with international conventions in the area of weapons (“controversial weapons”)
    • Update on the topic of “genetic engineering” for improved coverage of problematic areas of application
    • Adjustment of the weightings of reports from third-party sources (media) for more correct consideration and assessment of the so-called “controversies” in comparison to the company disclosures (correction of the situation of systematic asymmetrical information);

    • Update of the data for the recording of sustainability impact at the level of business activities (impact matrix) and thus incorporation of data developments.

      Inrate ESG-Impact: Model and expert-based

      The ESG impact rating model is periodically reviewed and updated. A model-based approach enables a high degree of comparability of results across sectors and areas as well as the highest possible amount of consistency over time.

      The model represents the “heart” of the rating process. The calculations link the analytical data and the analysis blocks – and thus the rating of the corporate social responsibility or management of the environmental and social effects of the companies – with the calculation of the environmental and social effects of the entire value chain ( including Scope 3). Based on the model results, the team of analysts performs the ESG assessment. Regular updates enable adaptation to developments. The data basis is broadening as a result of the continuous expansion of corporate disclosure and new studies on the environmental and social effects of economic activities (including in connection with projects to implement the Sustainable Development Goals (SDGs)). The updates build on many years of experience and the specifics of the last rating cycle.

      The basis of the Inrate ESG Impact consists in the knowledge and experience of the analyst team as well as the systematic of the model and the methodology behind it.

Rating Model Change

Financial market infrastructure provider SIX announced today the launch of a new climate data offering, aimed at supporting investors in reporting and monitoring of climate factors, and in climate-related investment and risk decision making.

The climate data sets, from various data providers in a range of industries, will provide clients with modelled and reported emissions data, covering over 33,000 companies globally, and bringing together multiple data sets on regulatory, historical and forward-looking climate impacts from providers including MSCI and Inrate. SIX also announced that it has recently entered into an agreement with environmental disclosure platform CDP to offer access to its global Greenhouse Gas (GHG) Emissions Dataset across various industries.

According to SIX, the new data sets come as investors increasingly require ESG and climate data to monitor investment decisions and to meet growing regulatory disclosure requirements, including the EU’s SFDR and the U.S.’ upcoming SEC Climate Disclosure Rules.

Martina Macpherson, Head ESG Product Strategy and Management, Financial Information, SIX, said:

“Understanding, measuring and managing climate risk and opportunities, as well as the impact that these can have on investment decisions, is a critical area of focus for market participants and policy makers alike. As more climate risk monitoring and reporting is required globally, the cost of compliance is increasing – both in operations and in terms of specialist ESG resources. SIX works with established providers of basic and specific ESG and climate data in the market.”