Understanding the Dynamics of the New S&P Global ESG Score

Getting the most out of the new CSA scoring system to improve ESG performance
Understanding the Dynamics of the New S&P Global ESG Score
Publ. date 13 Oct 2023
This year’s Corporate Sustainability Assessment (CSA) has seen quite some changes. With the introduction of staggered assessment windows and score releases, companies have more time at their disposal for completing the questionnaire, and may find the results more dynamic than before and subject to change. One may also notice the new addition of an “S&P Global ESG score” and wonder what it signifies. Here is Finch & Beak’s take on how you can better leverage these changes to better improve your ESG performance.

What is your S&P Global ESG Score?

CSA is getting stricter and stricter every year, and there is no guarantee that your company will receive a high score despite the strenuous struggle to complete the questionnaire. However, the new “ESG score” is set forth to give due credit to your efforts even if you don’t succeed to meet S&P’s scoring criteria on certain questions.

How exactly does the ESG score achieve this end? In order to understand the way ESG score works, first you need to know the different disclosure levels needed for different CSA questions.

  • More than 40%² of the questions in the CSA require public disclosure, in the form of a website or documents in the public domain.
  • For a lesser but still significant number of questions, public disclosure is not mandatory. However, companies will only receive a partial score as a rating of internal performance, and full marks can only be awarded with additional disclosure, i.e., making all relevant information public.
  • The remaining questions allow for the inclusion of internal documents and do not award extra credit for public documentation.

The ESG scoring does not vary much from its CSA counterpart, but the major difference lies in the adoption of a modelling approach to address the forementioned gaps in disclosure. The ESG score can be impacted in the following ways:

  • No change will be made to points received on questions with required public disclosure, or the points received with additional credit on public disclosure.
  • In the case where internal information is shared with S&P for a performance rating but not with the public, the ESG score adopts a factor-based matrix completion model, and allocates an estimated score based on your performance on other questions or the performance of your industrial peers.

Once the modelled question-level points become available for each question, they are assigned weights at question-, criterion- and dimension-levels respectively, and then aggregated to produce a global ESG score.

The ESG score adds another facet to the CSA score, but it would also be useful to remember the fact that there is still a lot of potential in your CSA score to be leveraged for benchmarking. You can always refer to percentiles or year-on-year changes to evaluate your performance. Or, with S&P’s premium offer, you can identify best-in-class companies in your industry at criterion level, as well as peers with similar performances as yours.
 

What does the ESG score mean to your company?

In our observation, the ESG score makes your CSA results more dynamic and interactive than before. With the new rule of staggered publication of results, there is a high possibility for your ESG scores and percentiles to evolve, depending on how well your industrial peers are doing, as their performances become part of the feed to the industry database and model.

In order for your company to better leverage this change, we suggest you check on a monthly basis, i.e., around the time of new scoring releases, monitoring possible changes in your scores and percentiles. If you notice a difference between your ESG and CSA scores on certain questions, it signifies that there is potential for you to do better in the areas concerned, as the ESG score reflects the gaps in disclosure and performance between your company and your peers on the questions. Furthermore, these specific questions might be in focus for 2024, so it is advisable to pay extra attention to them in advance. By doing this, the global ESG score will help you better position yourself in your industry, and become another point of reference on your journey to ESG excellence.
 

Keeping the full picture of CSA in mind as we head into 2024.

Once again, we should always bear in mind that obtaining a good ESG score forms an integral part of your CSA participation effort, which requires a mindset of continuous improvement and daily endeavor to make sustainability become “business as usual”. Prioritization of material issues, as well as topics with high data availability and improvement potential, can prove to be quick wins. A heatmap of material topics also provides you with a roadmap of the items that need to be worked on in the mid- and long-term. Check out our downloadable material at the top of this article for more tips & tricks.

If you are looking for tailored insights on navigating the methodological guidelines and interpreting the CSA results, please reach out to Johana Schlotter at Johana@finchandbeak.com, or call +31 6 28 02 18 80 to discuss how Finch & Beak can help you meet your performance targets and accelerate your sustainability journey through our services.

¹CSA factsheet, p. 6, Assessment Windows & Publication of Results

²Methodology, p. 8, Data Disclosure

About Zehuan Xiao

Young professional making a fresh start in the field of sustainability | zehuan@finchandbeak.com  

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