5.7 Two sustainability rating agencies

The CDP is a not-for-profit charity that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.1 The CDP is an issue-specific rater focusing on the disclosure of greenhouse gas emissions, climate change, water security and deforestation to prevent climate change and protect natural resources.2 For CDP the quality of the data reported is key for delivering credible results. With the disclosure of greenhouse gas emissions CDP aims at improving the management of environmental risk. The CDP holds the largest collection of globally self-reported climate change, water and forest- risk data. In 2011, around 3500 companies reported data to CDP. In 2014, the number of companies rose to nearly 5000 companies reporting data to CDP. In 2015 CDP was working with 822 institutional investors holding US$95 trillion in assets to help them identifying environmental risk in their investment portfolios and making more informed and sustainable investment decisions (CDP, 2015).3 In 2018, the number of companies disclosing through CDP has rosen to 7,000.4

The CDP has a transparent scoring methodology publicly disclosed, including information about eligibility requirements, an explanation of how scoring works, all of the survey questions and their respective point allocations.5 The objective of using the scoring methodology is to incentivize companies to measure and manage environmental impacts through participation in CDP’s climate change, water, forests and supply chain programs.6

The MSCI ESG Research is an independent provider of ESG ratings and also in- depth research of the ESG business practices of companies worldwide. The MSCI’s services help investors to identify ESG risks and opportunities not detectable with a traditional investment research. It uses early warnings and timely updates on its methodology to keep their clients up to date and help them to make more informed investment decisions.7 The MSCI provides investment decision support tools (e.g. indexes, analytical models, data, real estate benchmarks and ESG research) to investment institutions worldwide to support every part of the investment process (e.g. portfolio construction and optimization, performance benchmarking and attribution, risk management and analysis, index-linked investment product creation, asset allocation, investment manager selection and investment research).8 The MSCI defines its business model as highly flexible that enables clients to select the individual products and services they need and integrate them into their own investment processes and methodologies.

In August 2014, the MSCI acquired Governance Holdings Co. (GMI Ratings), a provider of corporate governance research and ratings to institutional investors, banks, insurers, auditors, regulators and corporations seeking to incorporate ESG factors into risk assessment and decision-making.910

Through this issue-specific tool, the MSCI ESG GovernanceMetrics provides institutional investors with corporate governance research and data on over 7,000 public companies worldwide to assess corporate governance risk and to identify good governance leaders. Asset managers and asset owners can access company profiles, governance scores and underlying governance and accounting metrics to satisfy client investment guidelines, enhance engagement activities and manage potential portfolio risks.11