ESG Ratings and the Stock Markets
After introducing the primary components of a proper vectoring approach, namely a sound company purpose, a focus on a small set of relevant materialities synchronized to the Sustainable Development Goals, we endeavor to explore the connection between sustainability and the environmental, social and governance (ESG) ratings and how the latter are evaluated by stock markets. With the help of several company examples, this chapter first examines the increasing awareness of ESG factors within the investment community, then moves on to suggest an approach for designing a company-specific ESG ratings game plan. An overview of the most influential ESG ratings is also provided, including a summary of their background, methodology and typical usage.
- 1.Thompson, J. (2018, May 28) UN responsible investing body threatens to kick out laggards. Financial Times. Retrieved from https://www.ft.com/content/794219c0-6002-11e8-ad91-e01af256df68
- 2.Robeco (2017) 2017 Active ownership report. Retrieved from https://www.robeco.com/docm/docu-2017-active-ownership-report.pdf
- 3.This case is an abridged and edited version of the eMBA case assignment by Claudio Mellace, Etienne Zeller and Laurent Gaye (IMD eMBA June 2018) conducted with CADMOS and its engagements funds under the supervision of Professor Benoit Leleux. Copyright © 2018 by IMD—International Institute for Management Development, Lausanne, Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of IMD.
- 4.De Pury Pictet Turretini & Cie S.A. (2018) Cadmos Engagement Funds. https://www.ppt.ch/en/cadmos/. Accessed 18 April 2018.
- 5.Interviews with Melchior de Muralt, Managing Partner at De Pury Pictet Turretini & Cie S.A. (2018).Google Scholar
- 6.BlackRock Inc. (2018) Larry Fink’s annual letter to CEOs. https://www.blackrock.com/corporate/investor-relations/larry-fink-ceo-letter. Accessed 7 April 2018.
- 7.Grewal, P. (2018, March 16) Suspending Cambridge Analytica and SCL Group from Facebook. Retrieved from https://newsroom.fb.com/news/2018/03/suspending-cambridge-analytica/
- 8.Shen, L. (2018, March 26) Facebook Stock Is in the Red for the Year After the FTC Confirms Investigation. Fortune. Retrieved from http://fortune.com/2018/03/26/facebook-stock-ftc-investigation-cambridge-analytica/
- 9.Van der Kaaij, J. et al. (2015) Avoiding the Reporting Trap, A Frontrunner Approach for Building “Investor Proof” Sustainability Strategies [PowerPoint slides]. Retrieved from https://www.slideshare.net/finch-beak/avoiding-the-reporting-trap-a-frontrunner-approach-for-building-investor-proof-sustainability-strategies-52488721
- 10.European Union, European Parliament and Council (2014, October 22) EU Directive 2014/95/EU amending Directive 2013/34/EU as regards disclosure of non-financial and diversity information by certain large undertakings and groups. Retrieved from https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32014L0095
- 11.Wong, C. (2018, March) Rate the Raters 2018: Ratings Revisited. Retrieved from http://s10458.pcdn.co/wp-content/uploads/2017/12/SA-RateTheRaters_Ratings-Revisited_March18.pdf
- 12.APG Group (2017, May) Sustainable Development Investments (SDIs) Taxonomies. Retrieved from https://www.apg.nl/pdfs/SDI%20Taxonomies%20website.pdf
- 13.This case is an abridged version of DARWINIANS AT THE GATE: SUSTAINABILITY, INNOVATION AND GROWTH AT DSM (IMD-3-2355). Copyright © 2018 by IMD—International Institute for Management Development, Lausanne, Switzerland (www.imd.org). No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means without the prior written permission of IMD.
- 14.DSM (2018) Royal DSM Integrated Annual Report 2017. Retrieved from https://annualreport.dsm.com/content/dam/annualreport/ar2017/en_US/documents/DSM-Annual-Report-2017.pdf
- 15.DSM (2018) DSM’s 5 Key SDG’s. https://www.dsm.com/corporate/sustainability/vision-and-strategy/five-sdgs-where-dsm-most-influential.html. Accessed 20 June 2018
- 16.DSM (2017) DSM Sustainability Introduction. Retrieved from https://www.dsm.com/content/dam/dsm/cworld/en_US/documents/dsm-sustainability-introduction.pdf
- 17.DSM (2016, September 8). DSM named leader in Dow Jones Sustainability World Index [Press release]. Retrieved from https://www.dsm.com/corporate/media/informationcenter-news/2016/09/37-16-dsm-named-leader-in-dow-jones-sustainability-world-index.html
- 18.DSM (2018, June 20) DSM strategy update [Press release]. Retrieved from https://www.dsm.com/corporate/media/informationcenter-news/2018/06/19-18-dsm-strategy-update.html