In its methodology description, MSCI explains that it looks at a range of items when coming up with an overall score, ranging from CO2 footprint to diversity on the board.
It says it “assesses thousands of data points across 37 ESG key issues” including carbon emissions, water stress, labour management, health and safety, boardroom pay and business ethics.
Presumably due to the dominance of its CEO and major shareholder, Tesla, which has arguably done more for the cause of green transport than any other company, is given a “High Risk” score by Sustainalytics.
SCM said it rates those multiple metrics against peers in the same sector, meaning a tobacco company could get a good score because it is greener than its peers.
Sustainalytics scores are absolute, meaning it tends to give higher risk marks than MSCI. BP and Shell are both rated as High Risk by the company.
Its literature says: “This means that a bank, for example, can be directly compared with an oil company or any other type of company.”
ESG funds attracted almost £1 billion a month of new money last year, according to figures from the Investment Association as investors seek more ethical homes for their savings.
The surging demand has led to a flurry of new responsible investment fund launches and arguably driven up the value of ethically-run businesses.
