FAQs for ESG Rating
1What is an ESG rating?
An ESG rating evaluates a company’s performance in Environmental, Social, and Governance areas. It provides insights into sustainability practices and risk management.
2How does an ESG rating differ from a credit rating?
Unlike credit ratings, which focus on financial risk, ESG ratings assess non-financial factors. ESG ratings consider a company’s impact on the environment, social responsibility, and governance practices.
3Is an ESG rating a recommendation to invest in the rated entity?
No, an ESG rating does not imply investment recommendations. It merely reflects a company’s ESG performance and helps investors make informed decisions.
4What is the frequency of ESG rating updates?
ESG ratings are typically updated annually or as needed. In case of occurrence of material event, GlobeTrend will update the ESG rating of the concerned company in less than 10 days.
5Where can I find the methodology used for assigning an ESG rating?
The methodology is published by GlobeTrend on its website. The issuer/ratee companies can access it to understand the rating process.
6Who pays for an ESG rating?
In Issuer-pays model, the issuer/ratee company pays for the ESG rating.
7Who regulates an ESG rating provider?
ESG rating providers are regulated by relevant financial authorities in each jurisdiction. In India, SEBI oversees ESG rating agencies.
8Who benefits from an ESG rating?
Investors, stakeholders, and the company itself benefit from ESG ratings. Investors gain insights, stakeholders assess risk, and the ratee companies get further insights to improve their initiative in Environment, Social and Governance pillars.
9What are the benefits of having an ESG rating?
ESG ratings enhance a company’s reputation, attract responsible investors, and drive positive change in business practices.
Rating Methodology
10What do the various ESG rating symbols mean?
ESG rating symbols (such as A, B, C) represent different levels of ESG performance. Higher symbols indicate better sustainability practices.
11What is the difference between an ESG score and an ESG rating?
An ESG score represents a numeric assessment, whereas an ESG rating evaluates a company's overall performance, indicating whether it's excellent, average, or falling behind. Additionally, an ESG rating includes a qualitative description to provide more context.
12 Who can access the detailed rating rationale of a rated entity?
The ratee company can access the detailed rationale behind the ESG rating. GlobeTrend provides detailed rating rationale in the ESG rating report.
13Can a rated entity provide feedback on the ESG rating?
Yes, the ratee company has the opportunity to offer feedback to GlobeTrend regarding the allocated ESG rating. GlobeTrend reserves the option to enhance its rating methodology should there be room for improvement.
14What data sources are used to assess the ESG rating?
GlobeTrend uses publicly available data, company disclosures, and industry-specific information. Since GlobeTrend follows issuer-pays model, the ratee company is supposed to provide required information to the rating team to get an ESG rating. This information is sought through a questionnaire.
15What information is to be disclosed to get an ESG rating?
GlobeTrend seek information about various key factors under environment, social and governance pillar. The detailed questionnaire can be accessed from its website.
16How are key factors determined?
ESG Key Factors are identified according to the industry classification outlined by SEBI. Key factors are determined at the basic-industry level. These factors are chosen based on how much impact the business operations of companies within each industry have on environmental, social, or governance-related factors.
17How are key factor weights determined?
Once Environmental, Social and Governance key factors have been selected for a basic-industry, as per the SEBI industry classification, we set the weights that determine each key factor’s contribution to the overall rating.