Getting the Most out of ESG Ratings: 5 Tips to Prepare for DJSI

Using the remaining months ahead to kickstart your DJSI 2021 submission
Getting the Most out of ESG Ratings: 5 Tips to Prepare for DJSI
Publ. date 27 Jan 2021
Fueled by the rising investor interest in ESG and the demonstrated higher level of resilience of sustainable funds during the pandemic, smart companies are now sharpening their sustainability programs and performance for 2021 and beyond. ESG ratings are accelerating that journey, allowing companies to identify gaps in their approach. Healthy competition within industries, and increased levels of transparency are making it more difficult for laggards to hide. Companies invited for the Corporate Sustainability Assessment (CSA), the questionnaire for selecting the constituents of the Dow Jones Sustainability Index (DJSI), have only two months for bridging relevant gaps in time for the release of the new assessment, expected to open early April 2021.

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As of 2020, all DJSI-eligible companies are assessed by S&P Global, either based on their own provided input or through assessment based on public information alone. In addition, overall ESG scores are freely accessible online and question-level scores and publicly available data points will become available to subscribers of S&P Global Market Intelligence platform in the first half of 2021. This increased level of transparency, a development that’s also visible at Sustainalytics and MSCI, is beneficial for ESG-leaders and challenges ESG-laggards to step up their game.

While Sustainalytics and MSCI ratings are composed based on public information, DJSI-eligible companies can make sure that S&P Global has the most complete possible view on company performance by actively participating in the CSA. Demonstrated by record participation in 2020, more and more companies are seeing the benefits of this. While it does require time and effort, the results of DJSI-participation are visible in clear question-level score feedback, a rich source for learning and internal engagement, and increased exposure towards investors when companies achieve inclusion in the DJSI Indices.

In 2019, professors from HEC Paris investigated the effect of inclusion in the DJSI World Index on investor behavior, comparing firms in the DJSI to other firms that had a strong CSR performance but were not listed on the Dow Jones Sustainability Index. Their findings demonstrated that addition to, or continuation in the DJSI attracts more attention from financial analysts, with more reports being written about these firms. This eventually led to an increase in the percentage of shares held by long-term investors indicative of a trend that professional investors are increasingly paying more attention to CSR-visible firms.

If you’re planning to actively participate in the 2021 assessment, here are five things you can do to start the annual DJSI cycle on the right foot:

1. Check your eligibility and industry classification

Check out the invited universe to find out for which indices your company is eligible – the list for 2021 is expected to be published in the coming weeks. Additionally, make sure to check your industry classification, as this impacts your company’s questionnaire structure,  peer group, and level of competition. The assigned industry is based on the GICS classification and can change if your company has had major developments in its business model or key activities. Spin-offs, mergers, IPOs or other forms of restructuring can also lead to changes in eligibility or industry classification.

2. Engage internal stakeholders & draft project plan

Gather all internal stakeholders for an internal kick-off session in which previous results are shared once again and plans for the upcoming weeks are drafted. Useful tools to develop your company’s project plan are:

  • ESG Program Canvas: The canvas is designed to create the big picture on where your sustainability strategy currently is and how it connects with the questionnaire criteria in order to identify your company’s improvement potential (based on your results). The newly shared question-level scores can help your company to get a clearer view on its performance gaps. Part of the process is to rank interventions based on both impact and feasibility, in order to differentiate low hanging fruit from more structural and long-term improvements.
     
  • Summary of 2020 DJSI results: Finch & Beak’s summary of the results webcast hosted by S&P Global includes the most remarkable outcomes of last year’s assessment including clarifications on topics such as Emerging Risks, Health & Well-Being and Information Security/Cybersecurity & System Availability.

Furthermore, on 8 February 2021, S&P Global has published the newest edition of the Sustainability Yearbook, which gives more detailed industry insights since also the absolute scores of all assessed companies are publicly available, including those of companies who were assessed based on public information

3. Join our DJSI webinar in collaboration with S&P Global

On March 2nd, Finch & Beak hosts an ESG Acceleration Webinar in collaboration with S&P Global. The session will shed light on the human resources-related criteria in the assessment, trends, methodology changes, and how to partner with the HR-department to improve your ESG performance. Sign up now to participate live or, if you can’t make it, receive a link to the recording afterwards.

4. Prepare for methodology changes in the 2021 assessment

Every year, S&P Global raises the bar in order to identify best-in-class companies that outperform their peers by demonstrating sustainability best practices – reflected in an updated questionnaire to stay sufficiently challenging. The methodology changes for 2021 are expected to be communicated by S&P Global around in March. However, preliminary methodology updates have already been shared for company consultation: check the Inbox of your company’s administrator account in the assessment portal to find the proposed developments for your sector.

5. Get in touch to accelerate your ESG benchmarking results 

With over 15 years of experience in ESG Benchmarking support including DJSI, Finch & Beak is one of Europe’s leading experts in improving our clients’ sustainability programs and ESG performance.

The Finch & Beak company vision is to accelerate sustainability. Our ESG and sustainability strategy work is characterized by a continuous improvement method that leverages existing assets in the short term while identifying opportunities for strategic development in the future.

In 2020 we supported customers across nine countries with their DJSI approach, and we welcomed more than 100 participants to the DJSI Expert Trainings we hosted in collaboration with SAM over the last four years. Our method proves its success by the fact that Finch & Beak’s average tenure of DJSI-clients is more than three years and that our DJSI-clients rate their satisfaction with an 8.9 on average.

If your organization is looking to accelerate its sustainability performance, please download our service description or contact Josée van der Hoek, Director and DJSI expert at josee@finchandbeak.com or call +34 6 82 04 83 01.

About Nikkie Vinke

Multidisciplinary advisor in ESG benchmarking, sustainability strategy development and execution. | nikkie@finchandbeak.com

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