Market consultation on Moody’s ESG Assessments methodology

Moody’s ESG Solutions provides ESG ratings and assessments for more than 5,000 large-cap companies. They evaluate hundreds of data points to measure the degree to which companies manage their exposure to those factors that are important to their stakeholders and their business. The impact of ESG factors on the company’s value are considered, as well as the social and environmental impact of its activities.

The company seeks to improve its ESG assessment system and has recently launched a consultation with clients and market participants to review its ESG assessment methodology.

Among the improvements that they seek to introduce to the methodology are:

• New analysis subcategories (Physical Risks, Cyber and Technological Risks, Responsible Taxation).

• Improve the dual materiality approach to balance the interests of shareholders and stakeholders, and to reflect the increasing integration of ESG factors in financial analysis.

• Increase the number of industry frameworks from 40 to 51.

• Improve the data structure underpinning ESG assessment to provide greater transparency in scoring methodology with comparable ESG metrics and associated data sources.

• Add an Overall ESG grade that allows users to quickly understand how an entity is performing relative to the entire universe of entities assessed by the methodology.