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ESG Ratings Methodology - From India for India
Purpose
Weightage|Data|Score|Theme
Framework
The purpose of our ESG Rating services is to achieve consistent, fair, and transparent ESG ratings and data-backed insights to help organizations achieve compliance and sustainable growth. We will meaningfully engage with our issuers, subscribers and other stakeholders and provide them with relevant and actionable insights.
We have designed a comprehensive framework for evaluating companies' ESG performance. This framework will consider environmental, social, governance and commitment factors with clear weightings for each category. Compliance to India’s regulatory framework is included and has significant weightage. Metrics chosen are relevant for each ESG factor that are measurable, comparable, and industry specific. Metrics will be reviewed half yearly as a routine and on need basis. We shall consider best practices and stakeholder concerns due process
We have developed a robust data analysis method to translate raw data into meaningful ESG scores.
Framework
Weightage|Data|Score|Theme
Framework
Factors, Attributes and Themes
- Factors: Environment, Social, Governance & Commitment. Total 4.
- Attributes: Environment - 16, Governance - 9, Social - 24 & Commitment 29. Total 78.
- Themes: Sustainability Practice - 53, Sustainability Underpinning - 36, Sustainability Reputation - 23, India Specific Compliance - 15 & Alignment to Global Practices - 55.
Our framework is built on 4 Pillars.
- Environment: These include Environmental impact (like carbon footprint, resource use, pollution and more)
- Social: These include ‘Social’ responsibilities like labor practices, diversity & inclusion, community engagement and more.
- Governance: These include Governance responsibility (like board structure, executive compensation, transparency and more)
- Commitment: These include demonstrated commitments of the management and the company (Meaningful and impactful actions of the company, it’s management and more)
Weightage|Data|Score|Theme
Weightage|Data|Score|Theme
Weightage|Data|Score|Theme
Sector specific weightage for Environment & Social. Governance & Commitment will not have sectoral weightage. Data points are based on Attribute, including sector specific Attributes.
Rating Scores & Themes Scores Rating scores include, ESG Rating, Parivartan Score, Combined ESG Rating, Core ESG Rating, Core ESG Parivartan Score, Core ESG Combined Score, Sustainability Score, Sustainability Parivartan Score & Combined sustainability Score. Additionally, Theme scores shall be calculated using the industry specific weightage of the attributes. All scores shall be accompanied by in depth analysis and are evidence based.
Rating Scale
Typical Workflow
Weightage|Data|Score|Theme
Rating scale is from 0 to 100, where 100 is the highest. Each is represented by a symbol
- 84 - 100: Low Risk, Strong Sustainability Practices
- 67 - 83: Low Risk, Good Sustainability Practices
- 51 – 66: Medium Risk, Good Sustainability Practices
- 34 - 50: Medium Risk, Developing Sustainability Practices
- 17 – 33: High Risk, Developing Sustainability Practices &
- 0 - 16: High Risk, Weak Sustainability Practices
Data
Typical Workflow
Typical Workflow
The data procured is broadly classified as processed and unprocessed data. Processed data are procured from our partners and acquired by our internal teams. These must meet the stringent internal requirements standards All unprocessed data procured are processed internally before being deployed for ratings purposes.
Typical Workflow
Typical Workflow
Typical Workflow
- Data Collection and Sanitization
- Analysis of 4 factors using 52 attributes and multiple data points
- Industry Weightages
- Ratings scores using the Rating Scale. Followed by Theme scores.
General Pricing Arrangement
Overview
Responsibility
Responsibility
We follow the “Subscriber Pay’s” model. Our pricing strategy is ‘Transparent Pricing. Meaningful ESG Insights’. We offer a transparent pricing mechanism for our subscribers. The general nature of compensation structure that we have are as under,
Responsibility
Responsibility
Responsibility
- Pricing is the responsibility of the business development team. They may be supported by the finance team AND / OR the marketing team.
- Neither the Ratings teams NOR the Research Teams are engaged in or are involved with pricing.
Operational Commitment
Operational Commitment
Operational Commitment
- Only operational requirements of the assignments are handed over to the ratings / research teams once the subscriber is onboarded.
- The commercial considerations are not disclosed to the rating team and research teams. Hence, all assignments are accorded the same degree of priority / importance / urgency, and any changes are driven by operational constraints / scope of work / resource utilization etc.
- No guarantee / assurances of a favorable rating for self are entertained. Fees paid are not a surety of favorable ratings.
- Rating fees are computed separately per assignment.
- Issuers / subscribers are liable to pay rating fees, regardless of whether they accept our rating or not. The full rating fee is to be pre-paid.
- We may consider an alternative price structure for large volume assignments. We also reserve the right to have an alternative fee structure for bulk deals, tenders, etc.
- We reserve the right to make changes to the fee structure at any time.
- We do not charge any fee to our Subscribers or to the investors for disseminating / publishing ratings and Press Releases on its website www.thesustainabilitypractitioners.com.
- Prior to agreeing on the contract terms for individual subscribers, the scope of the engagement along with deliverables, timelines etc, shall be finalized. This will include commercial considerations, reimbursements AND / OR any other expenses. The mechanism of payouts shall be finalized.
Fee Structure
Operational Commitment
Operational Commitment
We reserve the right to adjust rating fees within the framework of our compensation agreements with subscribers. Generally, our fees consist of four components:
- Due Diligence Fee (DDF): This fee covers the cost of our initial due diligence efforts. This crucial step helps us understand the scope of the assignment, identify potential challenges, and ensure we can effectively complete the project.
- Foundational Rating Fee (FRF): This fee covers the core costs associated with completing the rating assignment. The fee is determined based on factors such as the complexity of the assignment and other identified constraints.
- Subscription Renewal Fee (SRF): This annual fee covers the ongoing maintenance and updates related to the subscription.
- Reimbursements and Out-of-Pocket Expenses (ROPE): Reimbursements for travel, materials, and other expenses incurred during the project will be billed separately based on actual costs and agreed upon with the subscriber.
Important Notes:
- All fees are subject to applicable taxes.
- All necessary deductions required by law will be applied.
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