Impact of ESG on Financial Performance of Listed Securities

This study examines the impact of ESG (Environmental, Social, and Governance) on the financial performance of listed securities in the UK and Europe. It explores the principles of ESG and how they are used by socially responsible investors. The study also discusses the attributes for water sanitation and SASB accounting measures. The relationship between ESG and trade finance success is also analyzed.

Impact of ESG on financial
performance of listed
securities in the UK and
Europe

Contents
Contents...........................................................................................................................................2
CHAPTER 1: INTRODUCTION....................................................................................................3
1.1 Background to research topic.....................................................................................................3
The businesses qualify themselves for E, S and G.............................................................4
The attributes for Water sanitation....................................................................................4
The attributes for SASB accounting measures..................................................................5
1.2 Background to research organisation.........................................................................................7
1.3 Research rationale....................................................................................................................10
1.4 Research questions...................................................................................................................17
ESG Vs non-ESG.................................................................................................................17
Within ESG: Below and above median Vs their respective ESG ratings............................20
Corporate Knights Global 100..............................................................................................21
DowJones Sustainability Index............................................................................................22
ISS........................................................................................................................................22
MSCI ESG Research............................................................................................................22
RepRisk................................................................................................................................23
Sustainable Company ESG Reports.....................................................................................23
Thomson Reuters ESG Research Data.................................................................................23
1.5 Research aims and objectives..................................................................................................25
REFERENCES..............................................................................................................................26

CHAPTER 1: INTRODUCTION
1.1 Background to research topic
Environmental, social and governance (ESG) seem to be the principles for the activities of a
business used by socially responsible investors to track future investments. Environmental
impacts take into account how such an organisation behaves as environment manager.
Dependent variables investigate how interactions with workers, vendors, consumers as well as
the areas in which it works are handled. Environmental requirements may also include business
energy use, recycling, emissions, protection of natural resources and animal production. The
criterion is also used to determine any natural dangers posed by a business as well as how the
given conditions these risks. There are concerns such as possession and storage of polluted
property, harmful backflow prevention or enforcement with governmental environmental
legislation. There are also problems relevant to their control. Throughout the previous years,
politically progressive projects have been reputed to entail a balance on the portion of that same
shareholder. Although they narrowed the number of investment-eligible firms, they therefore
limited the possible benefit of the investor. Sometimes the "Bad businesses were really good of
course as far as the financial performance was concerned. Currently, general research on this
subject suffer from a variety of limitations. In fact, many are focused on past performance
records, which is not inherently a future performance predictor. This is particularly important in
the ESG environment because of the sheer complexity of ESG problems that are formed by
rapidly shifting megatrends like environmental issues as well as demographic changes. In
addition, from negative screening to complete ESG inclusion, ESG investment methods vary
greatly, and can also lead to various desired effects. Crucially, there are presently no
standardized guidelines for how ESG variables should be accounted for and calculated in the
industry, restricting the reliability of ESG output between organisations. Although the few
researchers in the field of single deposits indicate a possible real performance in certain markets,
perhaps with some varying impacts, the findings of many other equity research suggest a much
greater difference. These considerations mean that it would be impossible to draw assumptions
purely again from previous research, it would be necessary to optimize further analysis. The
topic of how ESG contributes to trade finance success will continue top of the agenda, including
ESG factors being more common and stakeholders increasingly turning to Operating

performance both as way to discriminate between firms. They currently assume that ESG output
will provide useful information about the financial as well as equity success of a firm; however,
there is mixed experimental proof and further research is required, especially in the specified
industry.
In their opinion, however, the ESG study will help to recognise a range of possible
overdenture challenges and opportunities, such as the likely impacts of involved in energy
policies and cost reductions associated with increased asset use. It is evident that an objective
and reliable calculation of non-financial indicators in the short to lengthy period will help to put
a spotlight on expenditure and allow the company. The environmental, social and governance
score is that will help the organisation to have the transparency and increasing the performance
of the organisation. There are three methods to have the ESG score and it is equal weighting,
optimizing with historical data and industry specific weights which is given by MSCI ESG
rating. The equal weightage and optimizing is the best methods to have the ESG because the will
help in solving the government issues. The industry specific weights are helping the organisation
in increasing the financial performance. They will help the organisation to increase the
performance.
The businesses qualify themselves for E, S and G
The environmental and social issues are the industry specific and they will give the financial
performance of the organisation for the long term and the government issues are for short term
and they are giving the factors that will improve the performance of the organisation. The equal
weights are given to the E, S and G and they will have to give the factors that will improve the
performance and they are simple for the organisation. The optimizing is used by the organisation
for the finance and they will increase the quality and the industry specific will help the
organisation to increase the performance.
The attributes for Water sanitation
The sanitation is one of the needs of the human beings and they will make them hygienic and the
safe drinking water is important for improving the quality. The advantage for the people to be
hydrated and healthier is that they get the safe drinking water. The unhygienic water will affect
the human beings as they will get sick and have the problems. The water is one of the necessity
of the people and they will have to drink a minimum of 3 litres and they have many uses like
washing and having good quality. The sanitation is the process of removing the human waste and

the people are not having hygienic water they will use the water which will affect the health. The
sanitation is important because it is a day to day activity and it is important for the health benefits
of the humans. The waste of the human beings is affecting them and they will have the diseases
which is making them sick and they are not getting hygienic.
The attributes for SASB accounting measures
The Sustainability Accounting Standard Board was founded by Jean Roger in 2011 to
develop the accounting standards sustainable and they have the financial organisation that are
affecting the environmental, social and governance factors on the financial performance of the
organisation. They are having the industry specific factors that will affect the long term
performance of the organisation. The organisation in different industries are affected by the
industry specific and they will increase the performance. The industries are consumer goods,
financials, services and they will have different methods to improve the performance. It helps the
organisations in reducing the cost and increasing the quality.
Recent times, several shareholders have been persuaded, though those economic, sustainable
development requirements do not have any legal issues but are realistic. By pursuing ESG
criteria, businesses whose actions could suggest an increased risk could be avoided as
demonstrated by BP's 2010 environmental disaster and also the Volkswagen pollution crisis,
which shook up the company's stock as well as resulting throughout the resulting damages at
trillions of dollars. Environmental, societal and government represent ESG. Shareholders use
such non-financial considerations to define material challenges and development prospects more
and more as part of their research process. ESG indicators do not typically form the basis of
compulsory income statement, but the financial statement or separate stabilization is gradually
being made available by businesses. Many organisations, including the Sustainability
Accounting Standards Board (SASB), the Global Reporting Initiative (GRI) as well as the
Environment Financial Transparency Working Group (TCFD), are designing the principles and
identifying the materials required to promote their introduction into another capital structure.
After all, because in published studies a great deal has been explored about the relation between
a company's business success and ESG parameters, the empirical findings are always
contradictory. The multitude of information and methods used between studies can excuse the
absence of quality of the findings. The intensity of the relationship between financial as well as
CSR results depends in particular on the evaluation of both output and various measuring

parameters. It should be stressed that the cumulative positive effects on accounting efficiency are
derived from every of the three groups of ESG ratings, both environmental, social and
management. If we talk about economy or the efficiency of funds, although the results differ
significantly with the group chosen, so past studies could clarify why bonds are rarely observed
as aggregates. Therefore, they would assume that the use of a business model will have a
favourable, positively or negatively impact on ratings in various sub-categories. The ESG group
most researched is far-reaching governance, the beneficial influence of which is secondary to
environmental consensus, although social influences are less discussed. Ecological sciences
meta-analysis reports that a simple standard error offers more detrimental outcomes in relating
efficiency with ecological considerations. Therefore, focusing on sophisticated econometric
techniques seems fitting. She also admonishes that in areas of criminal law a strong association is
more prevalent than in those of civil law. Social aspects are shown to improve sales generation
by, for instance, increasing efficiency in the workforce, encouraging diversity and greater
comprehension of consumer needs. In 2017, for example, the U.S. petitioned a consortium of
investors controlling $2.8 trillion in cash. In order to encourage stronger corporate reporting on
performance management in financial reports, the Stock Exchange Commission cites the
findings of a survey by human management, which showed that a 5 percent rise in the loyalty of
workers to their company resulted in a 3 percent increase in sales in the ensuing year. In
comparison, the income of women-owned firms in the U.S. has increased by 103 percent
and gender-diverse large enterprises are 15 percent abler to expect upwards of their counterparts.
In some other example, Unilever has shown its latest sustainable development brands' valuation
prospects, which generated 50 percent stronger growth. Fundamentally, an overview of a
corporation's emphasis on ESG, the aspects wherein the organization communicates with the
community and culture over the medium haul, and its system of management supplement
conventional financial research, offering a greater view of corporate success in an inherently
unpredictable world. Changing climate remains to be the industry's highest concern, however the
pandemic's influence has exacerbated places where firms may fell short of ESG practises,
causing them to learn about threats which have not materialised. This year, S&P International
introduced to the CSA checklist many security data including privacy concerns as enterprises in
diverse sectors tackle rising cybersecurity concerns. Under non-disclosure arrangements,
businesses have the right to request such sensitive material.

1.2 Background to research organisation
Besides a strong positive social effect, it is possible that investors will still search for a
return on investment. Companies of ESG approaches claim that they have a longer-term and
more competitive outlook than "traditional companies, capable of performing in communities but
without ESG approaches. Numerous research reports indicate that ESG success and financial
performance have a strong relation. The ESG shorthand implies "environment, social and
governance," as shown in the overview. Some of these considerations are relevant for
corporations and different interested parties their businesses successful and viable for society as
a whole and not only (financial shareholders). The word CSR (social responsibility of
corporations) also serves as a generic term and for ESG acronym. From the S&P yearly
international rating it has been determined that ESG determination is consider to be a type of
assessment of a firm actual policy and capability for the ESG in preparing the strategies for
upcoming risk and the opportunities. Thus it has been stated that ESG assessment is meant for
the primary tool which is beneficial for the investors which actually provide a future looking
approach, long period perspective of preparation for all the risk and mismanagement relevant to
ESG in a specific time period. It is also determined that the methods of ESG have been founded
within the analyst’s areas as well as the company expertise that basically depended upon the in-
depth evolvement with all the business managers in order to control and assess the raw material
ESG influence over the functioning of company in past, present as well as upcoming time. The
global S&P rating assessment delivers the collaborated view which help the companies to make
sure that not any point of environment factors, social factors and governance factors would
impact the business situations.
In the context of MSCI rating for the ESG it is defined that these rating are basically formulated
to count a company elasticity over a longer time period, material of environmental industry. Risk
related with governance and social. The responsible manager uses a defined rule based
technology that help in determining the leaders of particular industry and other laggards as per
the vulnerability to risk of ESG as well as how they will control and regulate such threats that are
related with other competitive companies and stakeholders. It is also determined that stakeholder
might also regard a variety of factors related with ESG, valuables metrics and the information
which help in looking the scenarios of adopting the ESG investments techniques and also apply
for a beneficial ESG portfolio. All such elements mainly consist of a key which is industry

specific problems such as changes in climate, fluctuation in labour and human capital as well as
management, sex discrimination, data and privacy security, corporate governance as well as all
the other variables that can reduces the functioning of a company. For instance, a company
dealing in mining and the other in financial services faces various kind of ESG risks that will
decrease their performance as well as these companies also get chances which will be evaluated
on the main problems within their respective industry.
The UN principles for responsible investment is a valuable global company which
support in promoting the reliable incorporation of environment, social and governance variables
which help in making investment. It basically works to make sure that all the investment
implications of ESG will support the global network of investors signatories in making such
variables into the valuable and ownership decisions. It is truly independent which makes the
stakeholders to better utilise the responsible investments in order to increase the returns as well
as manage the risk in better manner, as it does not function for the profits and it involves within
the international principle makers which are not related with any of the long prevailing behaviour
that gives the main 6 Principles in which the signatory firms might become agree to put a great
effort in accomplishing the desired results. Thus, it has been determined that principle sign for
UN responsible investments are being liable for around 80 trillion dollar at international level in
the context of assets management that also involves some of the global influential and biggest
investors. Some of these principles are discussed underneath:
1. All the securities and bonds will be incorporated within issues of ESG including decision
making system and investment analysis.
2. It is obvious that all companies will be an active stakeholder and consider issues of ESG
within the techniques and practise of ownership.
3. Companies also have to disclose the suitable disclosure on issues of ESG by the other
firms in which they invest at global level.
4. All the companies dealing the investment sector will promote the acceptance and
implementation of the UN principles within the same sector in order to make higher
results.
5. The main concept of firms working together is to increase the effectiveness in making the
right implementation of all principle which help in making decision for betterment of
environmental, social and governance variables.

6. In last the key principle of UN states that all companies have to make a valid and
authentic report considering and elaborating all the activities and advancement in the
favour of making right implementation of right principles.
Therefore, it is stated that companies which have been at the priorities towards all such main
principles are accountable for an account of AUM of across $80 trillion in a specific timeframe.
This mainly includes different prominent founding signatories which are basically working to
launch and expand the concepts of these principles, these signatories are NGPF, government
pension fund of Thailand, CalPERS and the pension board of Canada. In addition, prior to
evaluating the possible impact of the modern laws and rules
Environment: This element involves the environmental effects and adverse effects of functions
of the enterprise. This criterion may concern the management of waste, the usage of resources,
electricity, CO2 emissions, global climate change approach, etc.
Social: All problems related to business partnership with community as a whole are included in
this pillar. This refers to internal players (employees, consumers, etc. and outside players
(government, manufacturers, society in general, etc.). All related event are the principles of the
organisation, the working practises of its workers, its contribution to local societies, the
promotion of safety and health in the business etc.
Governance: This would be the design's last foundation. In the past, consumers have been more
involved than in social responsibility in financial regulation. This may be linked to the autonomy
of the management, to an impermanence between the chief executive officer and the CEO, to
either the equality throughout the broad context of the Management board (variability of gender,
age, race, experience, etc. with the degree of administrative openness, to the relation to investors.
Although most experiments tend to engage in ESG towards money purposes, the materiality of
ESG may have several effects on financial results. Social and environmental considerations
improved management, for instance, will create new potential, mitigate ESG risks and reduce
costs. Although with separate stakeholder communities, numerous ESG-led acts will echo.
Sustainable investment growth has shown that ethical investments are attractive to clients. But
there are those with various motivations that influence company budgets greatly, if perhaps even
less directly. These considerations indicate that it must be impossible to draw assumptions purely
from the previous research, so it would be necessary to optimize further analysis. Several
corporations have realised that better control of social and environmental variables can decrease

costs, reduce costs, or help create profit making opportunities. Cost systems mostly reflect
environmental costs in certain industries, including for natural available materials, namely
mining, production, transportation and usage of electricity, as well as costs to society such as
labour costs. For instance, approximately 50 percent of the expenses throughout the papermaking
industry are about timber as well as transport, also with rest consisting more of additives,
electricity, and labour. Firms could not only minimise emissions associated through shipping, but
also minimize certain expenses by resolving such sustainability impacts by, for instance,
consolidation and/or bringing manufacturing facilities nearer to distributors. Providing both
economic and environmental incentives, thus. In particular, resource management initiatives
across activities as well as the chain management will decrease the susceptibility of companies to
competitive energy prices, rising healthcare costs, and investment vehicles used during hedge
accounting.
Customers who wish to make minimum support will buy environmentally friendly practices of
services and products from businesses, who they feel are personally responsible for. The NGO
strategies that are less important in predicting firms with high ESG credentials to reduce the
credibility risk - are less urgent but have considerable long-term implications. Good management
could contribute to closer ties with providers, stable deliveries of products, quality gains and
favourable personal loans in the production chain. Deeper searching, environment policy, by
protecting the feeds in the distribution chain, will protect the environment. The redeployment of
industrial plants can reduce the cost of emissions and transport. Promised availability of capital
decreases the volatility risk of these markets. They all add to the lengthy sustainability of
businesses.
S&P
Environment: These are the factors which affect the living organism and different factors are
considered of the surrounding area which affect the life of the people.
Green house Gas emission: These gases affects the health of the employees and people around
that which should be controlled so that the environment is polluted free and helps in providing
the safe environment in an proper manner. There is an higher risk in the emission of Co2 Gas.
The rating given to this factor is downward and negative.
Natural conditions: Natural condition also affect the environment as these conditions affect the
resources of the company and some times the losses may occur which have the impact on the

S&P company. Mainly the private sectors are affected it flows downwards and remain stable but
not having the negative impact.
Social: These are the factors which affect the business socially and have the impact on the life of
the people.
Health & safety: It leads to the safety of the people and the less financial and the social damage
which have the direct impact on the S&p company. IT weakens the business risk and flow
downwards from stable to negative and increases the regulatory risk
Social benefits: It help in earning the revenue and the opportunities which helps in reducing the
risk in an proper manner. It helps in limiting the cash flow limit and raising the rating from
negative to positive.
Government: The government rules and the regulations are to be followed in an proper manner
and helps in optimizing the risk which affect the business.
Risk management and Internal control: There are some factors which affects the business and
helps in optimizing the strength in an proper manner and helps in achieving the task. Proper
control is required by the company. The failures in money laundering and have the downward
impact from positive to negative.
Transparency: The rules and regulation and the works are transparent enough so that the decision
can be taken on time and helps in achieving the result in an proper manner. Quality of the
information is disclosed. Audit helps in increasing the effeciencies and the rating falls
downward.
MSCI
Environment: There are the various factors which affect the environment and also have the
direct impact on the company.
Climate change:Climate change have the direct impact on the life of the people and there are
various factors which affect the business like carbon emission, climate change have the impact
on the business.
Pollution and waste: Waste from the industry also have a impact on the life of the people like the
toxic emission from the waste, packaging material waste and the electronic waste.
Social: There are the various actors which affect the life of the people socially and have impact
on the company.

Human capital: Human capital has an direct impact on the life of the people as the capital is an
human capital is an requirement in every business and have proper labour management and the
proper safety of health of employees.
Product liability: Product liability is important proper care of the product can be done which
helps is proper investment and also helps in reducing the risk.
Government: The government factors are to be followed in proper manner and the proper rules
and regulations are to be followed.
Corporate Governance: It is an broad diversity in which the proper governance is to be done and
have the full control and the accounting done properly.
Corporate Behaviour: The behaviour of the employees is an important so the business ethics
should be followed and have the tax transparencies to gain the interest.
UN-PRI
Environment: The environment factors affect the business and have the impact on the life of the
business.
Plastic: The plastic ave the impact on the life of the people, Plastic is banned in some of the
countries and affect the health of business.
Sustainable land use: There is proper use of land and the resources are optimized properly and
help in proper growth of the business.
Social: The social factors also affect the health and the life of the individual so the measures to
be taken properly.
Human Rights and labour standard: It helps in providing the proper working conditions and helps
in doing the work in an proper manner which helps in increasing the interest of the employees.
Employee relations: The relation of the employees helps in building the connectivity and
achieving the task in an proper manner and resources are used properly.
Government: Government rules are to be followed in an proper manner so that the timely
decisions can be taken and transparency so that the task can be done easily.
Tax avoidance: The tax are to paid in an proper manner so that there is no penalty will raise in
the future and the decision to be take so that no more money is to be paid in an organisation.
Cyber security: Cyber security is provided so that no one can hack the system and frauds can be
analysed properly.

FITCH
Environment: Environment factors affect the business and also affect the organisation so that the
results can be derived.
Plastic: Plastic affects the business and the health of the people as these are hazardous to life and
the environment so there should be no use of the plastic.
Pollution from waste: The waste material also affect the environment as the pollution release
from the waste material which affect the people health.
Social: Social factors includes the health or the factors that affect the company and the individual
so that the proper decision will be taken on time.
Human capital: Human capital is an important resource and helps in increasing the economy
profit and proper work will be done.
Employee relations: It helps in building the good relations with the employees so that in future
growth can be derived easily.
Government: Proper government rules and the regulations are to be followed so that the decision
can be taken on time.
Transparencies: There should be transparency enough so that the interest of the employees is not
shifted and proper audit records can be checked and done on timely basis.
Corporate behaviour: The behaviour of the employees should be positive and helps in achieving
the desired results.
In relating the ESG to quarterly statements, regulators still have a part to perform. ESG laws
have increased by 158% throughout the UK and 145% in the United States and Canada over the
last 3 years. With ESG transparency required by the government world-wide, businesses with a
good role in ESG was the most durable. They escape the penalties and reputations of unfettered
capitalism. The evasion of court proceedings relevant to ESG, this may include infringements of
the records, bigotry, intimidation, contamination, modern slavery and sometimes even urban
development violations, would also alleviate both risks and costs of this initiative. In the
meantime, those that were excellent on immaterial environmental problems did not actually do
so significantly. This shows that financial success is being seen by organisations with financial
reasons for successful ESG performance. However, this thesis depends on historical evidence, as
with past studies. As the corporate climate shifts around a strategic perspective instead of an
investor model, a broader range of goals must be discussed and the connections between some of

the ESG's success and economic health become clearer as potential predictions are taken into
consideration. The tragic outcome of portfolio research (composed of corporate bonds studies,
benchmarks and long-service portfolios) forms the potential basis for investment interpretation.
Portfolio studies have a poorer link than non-portfolio (company-based) studies. This could
highlight the fact that several ESG investments follow a combination of pleasant and unpleasant
ESG tests which draw a wide range of investors looking for value and benefit. Thus this fund
category is united different business and non-market influences may result in fluctuations into
one grouping and distort out.
1.3 Research rationale
ESG is a common concept used by shareholders throughout financial sector to measure business
practices and also to decide potential business financial results. Shareholders are using it to
assess company behaviour and evaluating potential working capital management. It continues
that ESG "are indeed a sub-set of not-for-profit measures which include environmental, moral as
well as financial reporting concerns like carbon emissions manager to ensure compliance with
existing laws." These are variables in way to allocate, that are included in risk evaluation
techniques implemented both in investment strategies and even in risk assessment. This is a
concept that encompasses investments targeting fair benefit and lengthy effects on society, the
economy and the revenue of the company. ESG describes the type of investment referred to as
green investment." Sustainable investment has several definitions. Investment in publicly is more
accountable investment (SRI), ESG, value-based investment is among them. Another think-tank
positions ESG underneath the SRI word. Ethical investments, ESG investments and impact
investments are covered by SRI. In ensuring the viability and ethical effect of a business, ESG is
three main factors. Although non-financial, ESG considerations have a major effect on the long-
term investing stocks and bonds. ESG is part of risk control, conformity and funding policies.
Enterprises using ESG principles are more cautious, less costly and therefore more likely to
benefit on a long-term basis. Current or future harmful impacts on air, soil, water, wildlife and
people's health are correlated with environmental threats generated by business transactions.
Environmental practises of ESG organisations include control of energy and pollution control,
carbon mitigation and changing climate, as well as pollution management and transparency.
Environmental operations are included. Environmentally favourable outcomes including
eliminating or mitigating environmental liability, minimizing energy as well as other efficiency

improvements' expenses and growing benefits and minimizing legislative, enforcement and
potential liability.
Fitch:
It is included in top 3 credit rating agency of the world. Fitch is situated in America its
headquarter is established at New York. This agency is included in national statistic rating
agency for measuring and give rating on the basis of measuring impact of business activities on
environment, social and governance elements. Besides New York, second headquarter of this
company is situated at London. This organization is used different type of rating scale forgiven
rates to companies.
They use alphabetical scale rating system in which A to D grades are given to companies
on the basis of their operational performance. And contribution towards environment activities.
AAA rating are given to top class of companies which is registered and measure as best quality
providing companies on the basis of relevance of measuring impact of governance policies. B
define meddle class companies which is stability of performance is changes with time and C
showcase current valuable condition of organization. Those companies which included or rated
at D scale, these organizations treated as default companies, these are organization which not
fulfil and accomplish requirement and obligation formulated to maintain environment condition
of the organization.
Define E, S and G 400
E, S and G is stands for environmental, social and governance factors theses are use to set
standard for measure quality of operating business organizations. Theses are consider as part of
external elements of business which directly and indirectly impact on the performance rate and
perception of investor. Profitably rate of business entity of long term purpose is also effected
from theses elements. Environment factors includes impact of seasonal variations, change of
natural climate, availability of resource,impact of global warming , use of chemical products,
extortion of hazardous gas, or other chemical materials. All theses are directly connected and
linked with environment. During the time of setting standard and rating sale institutions focusing
on performance of organization on the basis of measuring their contribution towards
environment activities.
Social:This is consider as essential elements which impact on the profitability rate of business
entities. Theses define relation with social groups, theses are directly connected and linked with

relationship of organizations with different social groups. This factor is define how business
organizations are connected and relates with different suppliers, communities, customers which
directly and indirectly connected and relates with organization. Social factors are consider as
elements which become the reason of maintaining sustainable position of organization in market.
In 2020 rating of those organizations has been increases which manage relationship with
different groups of sociality in positive term as well as worked for development of society.
Theses are basically useful in attaining good position on the list of rating agency. Organization
directly focus on working in ethical manner.
Governance is related with policies and strategies which is used for maintain sustainability and
reliability by focusing on working in ethic manner by fulfilling all the norms of organization.
Governance includes working on the basis of policies and standard set by fanatical institutions.
Theses are useful in rating criteria as with the use of these factor credit rating agencies able to
take decision regarding which organization is work in ethical manner and fulfil environment of
government norms on the basis of that rating agency determine or choose which organization is
work in ethical manner and control the issue related with internal coherence, money laundering
and corruption. Credit rating ois high of those organizations which directly linked and formulate
separate governance policy as well as they focus on the price of share has been increase of
organizations which engaged in their governance.
E, S and G theses elements are directly connected with the success and high rating of credit
agency system. Various types of credit rating agency given rating to organizations on the basis of
the impact of theses 3 elements thus separate rule and provisions. On the basis of that business
entities able to measure performance of their organization.
How do businesses qualify themselves for E, S and G 600
There are various elements which include in E,S and G factors however different business rating
agencies select measurement criteria for given to organizations on the basis of focusing on
specific factors. Each rating agency have unique strategy which they use for decide organization
which work on the basis of fulfil all the norms of policies and set standard. Credit rating agency
consider only those organizations which organizing themselves for the purpose of measuring
their performance on the basis of environment norms. Organization to comply and qualify with
environment, social and governance rating scale they need to work according the manner and
rating scale which is measure and formulated by financial institutions.

Chapter 2: Literature review
Environment criteria includes energy required for completion of business operations and
during the time they need to find out rate require to control their wastage of products. Carbons
elements and impacts of climate changes due to production of business activities. On the basis of
that business organization which pass the criteria of annual investment and they are eligible for
investment and work according to the environment manner. Different rating agency has been set
different criteria for quality of organizations regarding environment, social and governance
prospective. On the basis of that those organizations which are not able to complete or pass
criteria of rating agency, generally treated and consider as qualified environment organization.
They for qualifying social criteria organizations need to contribute towered specific amount of
their profits toward the corporate social responsibility as well as different social and participate
in program which useful and attract social factors. On the basis of only those basis corporation
fulfil or pass the criteria of qualified for measuring or given rating on the basis of observing
factor. These are included relationship of company and its reputation in world market. Thus it is
relevant for the purpose of finding out all the relation of social elements with each and every
group of social long term success of their organization is totally depends and impact relation
with different groups of business society. It is essential for maintain relation with society and a n
organization is only qualified when they are able to change their perception towards different
groups of society. They need to contribute towards the labour, women, employee union only the
credit rating agency able to give them high rating which fulfil requirement and contribute from
their annual profits towards the social groups. Business units qualify for governance factors of
ESG rating only when they are able to fulfilled requirement of each and every element of their
organization. Governance is relating with how business internal system relates control and
procedure for run their business operations by fulfilling criteria and standard norms which is
assigning by various financial institutions. These are mainly focus on govern those policies and
business strategies which are directly linked and connected with the complete all the legal norms.
They mainly focus on fulfilling the requirement of their stakeholder and on the basis of that
formulate policies and compare with it.
Effect business decision are taken which help in formulating and useful for choose the
best alternative through which organizations can easily run their business cycle in the market. On
the basis of that every business organization are legally created and require businesses

governance which beneficial for maintain position in market. Value of business security are
determine on the basis of measuring and evaluating rating of organization.
Business organizations to qualify their set standards of governance need to formulate those
strategies and work in ethical manner by conveying normal of legal environment. Generally
credit rating agencies focusing on measure governance performance of organization
Business organization qualify the criteria of E, S and G on the basis of identifying the
relevance of their businesses activities and factor contribute towards run business operations. On
the basis of that financial institutions took their decision which will useful to work in effective
business manner. Securities are rate on the basis of performance of organization thus it is
essential for business organizations to work according to the set manner which will helping
generating profit for them as well a them can able to comply with the requirements of different
rating agencies. Thus it is useful for comply according to the norms of E, S and G standard.
Water sanitations1000
There are various essential attributes which each credit rating agency used for the purpose of
given rates to different organizations. Theses includes, environment, social and governance
attribute. Environment attributes are directly connected and effected towards the organization 's
rating scale .
Water sanitation is also part of attributes. Water is consider as essential and most reliable
source of business, changes arise in business environment directly impact and increase the value
of water, as it is beneficial for organization especially for human beings. Water is consider as
investing assets, with the last few years due to the changes in the policies of environment and
impact of global warming various changes has been arises within the water sector. Water is
treated as vital element it is not only use for drinking but also beneficial for the purpose of
production and manufacturing industries.
Water sanitation is related with the procedure of cleaning drinking water. This is also
includes cleaning of water as well as treatment of human excreta, swage, theses are essential as
due to the changes of climate rate of health disease has been increase due to not using cleaning
water. This type of heath issue arises especially in mid Asia and African contingent. Credit rating
agency focusing on given rating to this organization which are engaged in cleaning water
program or organizing awareness regarding saving and effective, optimum use of water, as it is
consider as essential factor which is necessary for human being to live their life.

Their will be many program is organize and run by different organisation or financial
institution or social group for making aware towards the Water sanitation program,.. The Credit
rating agencies given their rating in the basis of measuring their environment factors
performance, in which Water sanitation is also includes. Most of credit rating agencies gives
high rating to their organization which contribute their part of profs towards Water sanitation
program and also engaged in controlling and preventive use of extra wastage. Thus
organizations formulate policies and make aware their customers towards the Water sanitation.
Organization found opportunities towards engaged with Sustainable development clean
water program. Investors run away from using hazardous product, or carbon materials. The main
purpose of using focusing on Water sanitation is to found out opportunities toward the new
sectors control the risk of climate changes and rate of health diseases. Water sanitation is
beneficial for organization as on the basis of that manage can recognize the impact of
environment factors on business organizations. They generally focusing on how effective
manager formulate policies towards attain of their goal by not formulating systematic bossiness
strategies.
On the basis of that organizations use different factors ad methods of measurement which
beneficial for them to control the impact of water pollution. Generally due to leakage of wastage
or chemical products or wastage of water become the reason of high rate of water pollution .Thus
WHO formulate the policies which also includes set standard of E,S and G theses are useful for
measuring the value and contribution of organization towards the attainment of business goals.
Credit rating agencies mainly focusing on how effective business entities contributes towards
engineering in cleaning water and promote heath care regarding the use of water and issues or
problems arise due to the shortage of water and use of polluted water which may causes of many
health diseases.
Thus credit rating agencies on the basis of finding and measuring performance of
business organizations towards the attaining of making aware regarding Water sanitation can
able to provides them high rating. On the basis of that organizations can easily find out their
position in the market. Thus it is essential for organization specially multinational business
organizations to contribute and engaged itself towards the Water sanitation program, and
activities which useful are beneficial for the purpose of cleaning water.

Water sanitation is consider as the process which will useful for the purpose of cleaning wastage
and control wastage of scare business resource which is beneficial and useful for making
environment pollution free.
Generally multinational organization avoid to contribute and focus towards the water
Water sanitation programme and thy are only engaged with involve in activities which may case
the reason of water pollution thus to making aware regarding saving water E,S, and G is consider
water sanitation as their essential attribute. On the basis of that credit rating agencies provides
and rating on the basis of finding out and measuring each organizations contribution in this
program.
Fitch, for maintain the level of sustainability in market economy apply short term credit
rating system through which they can measure organizations quality for maintaining sustainable
level of working according to follow manner of social and environment. Theses short term rating
is relating scale of F to D in which corporations which measure at F1+ level is treated as
exceptionally strong organizations which meet all the requirements and obligations to meet
financial commitment by completing their environment, social and governance measurement
indicator.
On the other side F1, F2 and F3 are included in those organization which work and fulfil
requirements of their environment policies according to the base of organization. C rating scale
companies are considering organizations which can be treated as default entities due to non-
fulfilling requirements of social and environment activities.
Fitch rating agency is launch new scoring system which show the impact of various
environment, social and governance indicator on decision taken by companies or investors. This
new score system is flexible and transparency define relevance and materially factors relevance
during the time of rating give to different organizations.
Fitch apply new system in which assets are classified on the basis of different rating system.
More than of 15000 corporation’s measurement in financial corporatizing rating scale.
ESG rating is useful for measuring rating scale of banks, financial as well as non-financial
institutions, schools, hospitals, manufacturing units.
The main purpose of introducing new rating scale system to make aware to investor
regarding how organizations adversely impacted and their rating is decline due to impact of
environment, social and governance policies and strategies.

It is the first organization which measure the impact of ratings on organization due to non-
fulfilment of liabilities and obligations of their ESG indicators. This rating agency showcase the
relevance on materially of individual organizations rating system.
Fitch publicity represent method and procedure thy apply for rating organizations as well
as they also focusing on maintaining rating scale. On the basis of this credit rating scale system
investor can easily evaluate time required for took investment. They provide opportunities to
their investor so they can give review regarding the decision taken by rating agency.
Fitch changes their policies regarding with rating organization on the basis of their ESG
performance due to the impact of Corona Virus pandemic.
Due to this pandemic most of rating agencies are move towards the negative rating scale
however Fitch not convert or they use those indicators which not adversely impacted on the
performance rating scale of organizations. ESG factors not adversely impact on organization due
to pandemic period as compare to other relevant factors.
This outbreak directly related with the social factor and relation of various social group
due to strict rules of social distancing. Demand curve is shifted. Consumers are directly
connected and related with corona virus impact rather than effective from social changes. Some
of organization need to took financial assistance to restart their business, and many of business
are shutting down due the adverse impact of this pandemic however it positively impacts on the
sustainable level of environment which help in increase the rating scale of organization as they
are not use transport or any productive material which adversely impact on the organization.
Fitch is considering as one of the most reliable rating agency thus most of organization
use this rating agency for evaluating their financial performance. On the basis of that
organizations realise the worth of ESG factors. This rating agency play vital role as during the
time of financial crisis this rating agency faced scrutiny for playing major role for finding
organizational which the main reason of financial crisis. And getting down the rate of market
economy. This agency suffers from issue regarding with scrutiny because at the time of crisis it
suggests investors that they need to invest in mortgage securities which is beneficial for their
future business prospect. All those people who invest in mortgage securities their ratio of
companies is decline and their grade is measure at down level.

However, this organization is focusing on taken those indicators for the purpose of
measuring impact of Environment, Social and Governance elements which play essential role
and directivity these are related with the changes on environment policies.
This organization is mainly focusing on control the use or material of hazardous products
which adversely related with the productivity level of organization. Thus the main focus of this
agency is to change perception of their investor regarding with ESG factor in positively way
which will beneficial for investor as well as organizations too. They use new policy after
analysing perception, review and thoughts of their investors.
Fitch is helpful in ethical and effective manner. This organization on the basis of finding
out requirement of their customer changes in their grading system. On the basis of that
organizations able to measure performance of their rival business organization which is useful
and beneficial for formulating their further investment policies.
Fitch is applying environment, social and governance rating scale in which their main
focusing is identifying those indicators which direct as well as indirectly influence at sustainable
level of their environment factors. These factors are useful or beneficial for further formulate
effective business policies. For grading system, they chose environment policies, material used,
supply chain system, time require for fulfilling demand of customer, relation with social groups.
Fitch focusing on environment, social as well as governance indicator as with the changes
of time demand and requirement of customer has been change, they got attract towards those
organizations which work in ethical manner as well as which is contribute towards the social
responsibility ad work for completing obligation and norm formulated by governance.
Theses business entities will be generally focusing on how effectively they get work
towards the attainment of organization goal by wok in systemic manner which reduce the change
of adversely impact of the environment. In past few years due to the change of environment
condition, and scarce of resource, WHO decides to fine penalties of this organization which not
work according to the strategies and standard.
Fitch focusing on finding g out impact of relevant indicator through which they can find out
which organization directly related with the fulfilling the requirement and compliance of
environment policies. Fitch on the basis of identified relevance of ESG elements rating to
organizations.

More than of 40000 business entities re engaged with this rating agency. Environment
directly impact on the quality and efficiency rate of organization as the rate of production level is
depend on the materiel which used by organization, these raw material, weather, season variation
availability of resources are directly impacted on the efficiency level of organization. Thus it is
relevant for business corporations to work in accordance with the environment factors, on the
other side firm can only maintain their position in market only when they build strong
connection with different stockholder of their organization, social relation is essential for
maintain potion of organization for long period of time.
They need to work accordion to the policies, and legal norms. Fitch is generally focusing
on how effectively organization compliance with their environment, social and governance
aspect, these are essential and on the basis of that business corporation decide their future
business policies. For maintain their position in market environment they generally work
according with the manner of government norms, these are helpful in maintain the sustainable
opposition of organization in market. ESG are treated as essential norms which directly impact
on the success rate of business entities thus most of organizations and business corporation in the
basis of measuring their performance by rating given by Fitch identify and can evaluate their
position in market
Social threats contribute to the societal effects of corporations. Group opportunities like
safety and health promotion, the promotion of employment law, civil rights enforcement and the
emphasis on production quality are discussed. Increased performance and confidence, revenue
loss and staff turnover, product attributes and increased socially positive performance.
Governance risks apply to how corporations work. It deals with aspects including the
individuality and sustainability of that same company name, danger and inappropriate executive
pay control by financial reporting like improving the Board's flexibility and transparency,
protecting investors and shareholder interests, and providing reporting and disclosure of
information.
 Good effects involve aligning shareholders' and group process and eliminating
unexpected financial shocks. For several years ESG has been a release on the hand of
daily industry.
 In both these environments (atmosphere, corporate governance) over the past 5 years,
corporations have reassessed their status.

 The so-called double end is among the ESG equivalent (financial, social and conservation
sustainability).
 Sustainable corporations are both profit builders and community builders. Participants
shall include owners and clients, workers, local societies, etc. Benefit is not the sole
means of creating an enterprise, but a method of developing share equity, social energy
and environmental stability.
 Sustainability is an opportunity, ESG or sustainable development, not an expense. ’s
entire purpose of ESG is to be a profitable enterprise and to do enterprise wisely. That
means accountability and the application to the activities of ESG guidelines and
requirements.
 Its operations and set up more green enterprises and changed its agreements for its
employees, encouraging market diversity as well as sustainability. During the year, the
corporation earned $16.5 billion.
 At approximately £13 billion further expansion in the clean energy market is expected by
the banking industry.
Unimpressive outcomes of portfolio research (composed of fund manager tests, benchmarks as
well as long-short investment funds) are indeed the future nursery for investors' interpretation of
ESG investment bias. Compared to non-portfolio based (firm based) research, portfolio-based
research shows a poorer partnership. It may highlight the fact that even a combination of
positively and negatively ESG tests is pursued by many ESG investments, which draw a wide
variety of investors finding valuation and benefit. As a consequence, this investment party united
under one grouping, was seeing market as well as non-market things can affect disruptions but
drowned out. In addition, the findings show which most of the ESG is washed out like a
consequence of commissions, where on average constitute 2.5% of that same overall mutual fund
throughout the world. That being said, throughout a few hundred portfolio trials, it will be poorly
advised to pass the results to a complete study of further than 2,100 certain experiments,
indicating the contrary. The substantivizes of biodiversity is irrefutable. The problem, though, is
the incorporation of ecological, social and environmental requirements into financing decisions.
Method to maximize the maximum capability of ESG variables that boost value. They find, amid
problems, this has become a growing area of concern for the investment group. They have
outlined in this report what are conclude is the biggest review of scholarly literature each

conducted as it applies to ESG as well as CFP. It shows because in many parts of the industry,
ESG openings remain. This is especially true across North America as well as Developing
Markets, as well as for semi categories such as securities as well as commercial property.
Consequently, in way to lead their fiduciary responsibilities and properly balance the interests of
shareholders mostly with wider goals of society, the inclination towards long-term risk
management should be necessary for all sorts of shareholders.
Given the influence and dependency of companies on the atmosphere and community, SG
variables may offer useful insights into potential existing and future sustainability challenges and
incentives for big businesses. In essence, these ESG problems now have likely to result in a
direct or indirect financial effect on the employee's revenues and profits for shareholders. The
destruction of natural environments, for instance, could restrict the potential source of raw
materials to industries that depend on them for production. It could risk key manufacturing
inputs when such a condition is really not resolved, effectively restricting overall growth for
services that focus on such raw resources.
Through banks’ financial projections or qualitative analyses, we integrate such factors into
forecasting government debt research, whether they are adequately obvious and material. They
are gradually investigating whether it results in increased company revenues and investment
success as stakeholders adopt ESG as a central part of their investing strategy. In their opinion,
good understanding and mitigation of ESG risk will help improve lengthy investment and
financing performance of companies, especially where information ESG variables are well
remedied. Even more actual literature is, nevertheless, essential to decide whether there is a
conclusive empirical relation, particularly in the field of limited deposit, where comparatively
few scientific programs are being performed. It's because, based on business and location, the
meaningfulness and effect of that same ESG metrics will differ. For instance, for a coal
company, emissions and ground use threats are far more important than with a tech firm,
whereby social and environmental considerations might be more important. In this report,
businesses that performed well on content environmental impacts found improved potential stock
results and stronger increases in accounting productivity. Currently, general research on this
subject suffer from a variety of limitations. In fact, many are focused on past performance
records, that is not inherently a future production predictor. This is particularly important
throughout the ESG environment due to the obvious dynamic nature of ESG problems that are

formed by rapidly shifting factors like global warming and changing demographics. In addition,
from loss or damage to complete ESG implementation, ESG investment methods vary greatly,
and it can also lead to various desired effects. Crucially, there's many presently no standardized
guidelines for just how ESG variables should be accounted for and calculated in the industry,
restricting the reliability of ESG output between organisations. Although the several scholars in
the area of limited deposit indicate a possible significant advantage sometimes in markets,
perhaps with some contrasting views, the findings of several other equity research suggest a
much greater difference.
ESG Vs non-ESG
A benefit over the non-ESG portfolios with similar strategies and therefore further alpha creation
has been achieved in previous stock and bond holdings with a bias towards the ESG variables.
And it's no distinctive this period. Mostly during present Covid-19 disease ESG plan, greater
returns or reduced losses were rendered on downside relative to their non-ESG equal portfolio.
To explore at that with more depth in this study, we analyse the results of investments which
have a the ESG comparable variant of their approach in Fund Management Community. The
strategies stated here all demonstrate that most of sister ESG investments have been doing better
than non-ESG variants over past quarter, as well as over long term. Performance statistics are far
more convincing over long run. The recent three 5-year success reveals that all ESG-focused
funds evaluated here are well forward with of their comparable non-ESG portfolio in respect of
yields. ESG methods strive to be longer investments, and it is because figures indicate that they
might bring a distinction in yields. The idea that you are risking your yields by engaging in
the ESG is certainly not case with most the ESG-Factor Investments. Extensive research has
been conducted on this subject, which have shown why investments looking to take ESG
variables into consideration in their investing have responded better than comparable non-ESG
funds. They're taking longer to work out, and being proactive in this respect will enable you
enjoy the benefits. For instance, in some situations, investment managers strive to reorganise the
business they are investing in to improve transparency, corporate responsibility as well as to
further minimise environmental effects. When time progresses, these firms will potentially profit
from stronger debts-to-equity and sound free cash-flow. An improved capital structure, in
particular, could help to survive market declines to some degree. Getting said that, new business
climate has many uncertainties and is a true challenge of ESG initiatives. However, for time

being, they're demonstrating their value. A business cannot become the engine of the ESG
immediately. It requires time to build a deeply ingrained ESG community and management team
supportive of system-based thought and committed to investment (via analysis and advancement
and infrastructure cost) in longer-term strategies to drive value-sharing. High-ESG companies
are seeking to stop shorter-term, bottom-line vision. Typically, they envisage the trigger and
result of company decisions and exploit stakeholder-centric, valuation incentives whereas
eliminating stakeholder-related hazards. Stockholders are still flourishing, but not at detriment of
staff, consumers, vendors, the economy or planet—and typically over longer time period. As
businesses follow a stakeholder methodology to value development by integrating ESG within
their longer-term investment strategies, they can recruit the finest talent, create loyal consumer
base, succeed by good corporate leadership regulation, reduce risk, and accelerate successful
growth through engaging in sustainable technologies that have a meaningful effect on world. In
order to measure the Markowitz effective boundary, both ESG indexes and non-ESG indexes are
used in the collection of MSCI indexes to determine if the ESG metrics affect risk-adjusted
effectiveness. A system whereby each index is viewed as though it were single asset has also
been introduced to explain the disparity in risk-adjusted yields and draw-down threat.
Whenever it is related with the investments like a responsible people everyone must be
evaluate and analyse the beneficial companies by checking the financial status as well as looking
into the parameters that are non-financial such as company’s policies and practices which are not
harmful for any of the surrounding situations. For example, the non-financial variables mainly
include environmental, social and governance on which companies are reported to be positive or
negative making any contribution to the living society or circumstances. Thus it can be
determined that the decision of investing in the ESG variables is a basic stage in some countries
like India and Pakistan but in some nations or at global level which is a well-structured
philosophy within the concepts of investing. Some of the useful empathy are discussed
underneath:
Environmental Empathy: The glaciers which are melting due to increase in the standard
average at a global level in consider to be the main reasons of pitfall in the climatic conditions as
well as global warming. It is also discovered that immense decrease in the forest covers,
pollution of large and small rivers as well as air pollution are the main examples which indicates
that companies and mankind is total affecting the environment. As a results of environmental

empathy some of the primary elements which drives the actual disconnection and also makes this
to expand is consider to be the main facts that there has been a lack about the clear accepting
about the results of companies actions. It is observed that a decent amount of power is being
consumed in order to accomplish the area in which the overall happening is going to be held as
well as the un-useful material is needed to be decomposed or dumped so that it will not impact
the environment.
Social responsibility: SRI (socially responsible investment is considering to a method which is
beneficial for the correct investments that are openly insight the connection of ESG variable and
also to the healthy and stable long term life of society and market as a complete unit. All the
ESG variables are consider to be non-financial indicators because it is observed that
development of lengthy sustainable consequences is mainly related with stable, well governed
and functioning governmental, social and environmental systems. All these scenarios look upon
the company performance as a result of natural ecosystem. Likewise, the social standard
determines a company actual steps to manage the connection with the existing workers,
customers, suppliers as well the market regions or communities in which they operate. On the
other side, the government bodies cover the entire regions which are helpful for the company’s
bonds and securities which are required to be completed in desired time.
Corporate governance: This mainly covers the region of investing the duties and rights of a
management of a company which includes shareholders, bonds, different stakeholders that all are
helpful in better performance of company in an accounting year.
The drawdown probability is commonly used more as tail risk measure over a given time span,
which tends to explain downside risk in case of severe circumstances. It is determined by adding
the magnitude of the accumulated return to the prior high, which is the highest cumulative yield,
in the pre-defined time frame. ESG declarations and scores are an incredibly valuable method for
bringing environmental aspects into investment phase in a variety of ways. Initially, ESG
activities support financial stakeholders who aim to determine financial subjectivity of non-
financial reports on socioeconomic, corporate governance factors, practises and techniques over
the long term. The importance of rating included in ESG factors that are crucial part of
investment decision have increase in the recent time because of increasing interest of both
party’s investors in SRI and micro finance. The respective research suggest impact of ESG
scenario's and Sub-criteria which is important for portfolio performance and results. According

to Stark et.al the priorities of companies with better rating of ESG is mainly depended over the
investment behaviour as most of these companies will invest in bonds for longer term that
deliver higher results over non-performing assets. It is observed that with the use of IVA
(Intangible value assessments) scheme system in making decision related with investment or
even portfolio performances with better ESG rating is reviewed and making all the other
variables fixed for that particular time frame. On the other side while making calculating the
impact of assets in the context of high and lower IVA rate system all the 3 stages profit margin
are compared in order to make better result.
SASB accounting measures
International Accounting institutions has been establishing a board for formulate or set
standard regarding measuring accounting norms for maintaining environment, social and
governance stability. Due to changes arises in market environment, lenders, companies,
investors, and insurance directly effective with the elements and factors of E, S and G thus thus it
is essential for international accounting organizations to establish as board which measure all the
criteria and performance of organizations. On the basis of that ESG agencies gives rating and
penalties and fine impose of organization which break any rule of Sustainable Accounting
Standards.
Main objectives of theses standard are to create sustainability with the environment which help
in control wastage of materials and maintain sustainability.
Measure of SASB is used on the basis of different kinds of disclosures. Main purpose of
this measurement is that these measurement directly connected with their investors and these
define financial impact of sustainability of using environment, social and governance factors.
Main purpose of SASB is to provides assistance to business organizations by managing,
identifying and provides report regarding sustainable of those topic which directly impacted over
the investment decision of investors. SASB accounting set standard a theses standard are
measures on the basis for analysing impact of environment, social and governance factor on h
past and present performance of business organization. SASB board evaluate document, annul
reports of participate organizations and on the basis of that thy took decision regarding
measuring performance of organization.
For instance, they may refer to risks management activities to minimise the effect of
environmental changes on business efficiency, or to green initiatives for opportunities in the

market. Second, ESG scores and measures are often used by social stakeholders to track and
measure the effects of their contributions, including the elimination of greenhouse emissions or
greater compliance with human rights requirements. In addition, some investors can use such
metrics to combine a mixture of both variables, based on investment approach and goals. On
both of these reasons, the ESG parameters offer a valuable mechanism for investment funds to
determine how these main shorter-term non-financial variables may influence firm
organizational value and have a longer-term effect on their external climate. Thus, in particular,
ESG reporting, statistics and prices can be used to enable stakeholders to take more educated
choices and value evaluations. Despite significant attempts to enhance ESG accountability in
recent times, questions have emerged about current lack of consistent reporting standards and
accountability at world stage. In addition, the lack of a widely agreed global set of standards and
criteria for reliable and substantive reporting poses a challenge to successful standardisation and
inclusion of sustainability considerations into investment decision-making process. In
comparison, the accuracy and standardisation of ESG scores could be hampered by the huge
volumes of ESG-related details revealed using differing core criteria and research methods. This
may be further exacerbated by the comparatively early stage of evolution of ESG procedures and
the variations in methodologies followed by ESG ranking providers, such as integration and
modification of some elements, like materiality. At current point, results across suppliers display
a lower degree of correlations about what really comprises a higher or lower ESG rating owing
to discrepancies in subgroups, number of parameters, weighting and distance. The study also
demonstrates that concentration of assets aligned with tilting investments towards higher-scoring
ESG issuers may, varying on the circumstances, impact uncertainty, risk-adjusted yields and risk
mitigation. Various variations of tilt-based portfolios that offer greater leverage to greater
issuers, frequently conducted at or below conventional indexes for stretches of duration. The
findings are compatible with portfolio selection in where a large content of exposures in portfolio
will increase the variability of portfolio, all the rest being equal. On contrary, the study of the
overall drawdown risk has found that ESG strategies have such a smaller drawdown risk relative
to non-ESG investments.
Within ESG: Below and above median Vs their respective ESG ratings
Investors use ESG ratings for the purpose of taking decision regarding their portfolio.
They choose those organization which score good ESG ratings. Environment rating is define

how effectively organization perform their functions in dynamic market environment where the
market condition requirement are change, it define how effective organization act as steward and
attain their goals by fulling criteria of environment policies. On the basis of analysing theses
rating scale investor can easily measure which organizations or business entity is beneficial for
them for the purpose of investment. As ESG rating helps in identifying best organizations which
useful for investment purpose. Different methods used by various organization to rate companies
ESG set particular criteria which help in given rating to these agencies also, investor companies
on the basis of that decide which rating agency they choose to measure their performance on he
basis of ESG rating.
On the other side in ESG ratings, financial institutions gives social rating on the basis of
how effective business entities deal with their customers, clients and people belong from
different social group. Rating are given by recognizing auditing, pay slips, leadership style adopt
by organizations.
On the basis of identifying medium and low rating criteria of different organizations
investor can recognize which organization able to bear financial risk. With ECG rating , various
types of scale has been used by different kinds of business organizations.
Organization are rated by third party on the basis of analysing environment, social and given
them governance criteria.
Bloomberg ESG data services: This rating agency is useful for providing essential
information regarding carbon market, renewable energy,. This organization collect information
from more then 10000 listed public organization which spread all over the world and on the basis
of that they Bloomberg rate companies.
They cover more then of 125 rating criteria which include different indicators of CSG,
supply chain, impact if climate change, compensation, reputation etc. On the basis of that they
give rating and if any company not able to proved information regarding their data then by
imposed penalty on them.
On the basis of that under ECG, in case of environment criteria this organization get medium
rating and for measuring social and governance it rated below ESG rating.
Corporate Knights Global 100
It is situated in Toronto this organization has publish 100 sustainable multinational
corporations in their annual magazine. This organization give rating on the basis of measuring 14

indicators, which cover, performance, supplier position, resource and management structure,
environment policies contribution towards social responsibility all these criteria are used for
given rating. Financial institutions give this rating agencies medium rating .
DowJones Sustainability Index
It operates its business consider as first global organization which measure environment
sustainability of business organizations. Their rating scale is based on the data collected from
companies which participated for this organization. They send more questionnaire in which 100
to 120 questions related with social, environment and governance. It cover up all the essential
question which help in measuring organizations' sustainability. DJSI Europe cover up more then
of 20 % European organizations. Financial institutions gives medium rating for measuring
environment criteria and for social low rating has been given.
ISS
This rating agency provides ESG solutions which help investors so they can develop and
formulate responsible business policies which help in taking investment decisions. It give rating
in different style , their will be 10 pillar which indicate governance practices according to high
and low basis. They use voting policies and on the basis of that organizations rated according to
environment, social and governance policies. They for give rating use more then 200 factors and
then categorised then into 4 pillars. Theses factors include all the essential or relevant business
factors which directly and indirectly related with companies environment, social and governance
elements. Companies invested for measure ore review their performance meter which decides by
ISS. This ratting agency took medium rating in case of environment and social scale In
governance low rating has been given according to ESG ratings.
MSCI ESG Research
They are globally investor which gives more then of 6000 companies rating, thy also
secure and give advises related with equities and securities. They give rating on the basis of
recognizing issue related with environment, social, and governance. They collected business
data from different source of government. On the basis of impact of climate change, liability,
human capital, social opportunities rating are given by categorising into 3 pillars. On the basis of
ESG rating according to environment rating scale low rate has been give and on the basis of

measuring social and governance indicator performance medium rating is given by financial
institutions.
RepRisk
This rating agency has been established in 1998 and it measure more hen of 84000 public
and private organizations performance and give them rating on the basis of environment, social
and governance factors. They select rating agency on the basis of focusing on 28 ESG issues,
which is based on 10 principles and on the basis of that they give rating to different business
entities on the basis of their performance.
This rating agency select their rating criteria on the basis of measuring theses indicators
organizations able to recognize their performance . According to ECG rating this rating agency
has been given median rate on the basis of measuring environment as well as social performance.
In case of measuring governance performance this rating agency has been given high rate of
business performance.
Sustainable Company ESG Reports
This organization has been formulated in 2008 and they cover up more then 6500
companies world wide. They have use different rating scale which useful in determining and
measure impact of environment and social rating. This rating agency focusing on measure and
indefinite main ESG indicators They set those indicators which set or very from different to
different countries. For measuring and given business rating it is essential for business
organizationals to cover up at least 70 indicator criteria on the basis of that performance are
measure.
Theses are dividing into 3 categories which includes preparedness, disclosure, and
measurement of performance on the basis of defining particular set standard. This rating agency
use different method of rating scale thus n the basis of ESG ratting according to environment
criteria medium rating is give to this agency and in case of measure social performance or
indicators, low rating is given. As per ESG criteria medium rating has been given to this
organization.
Thomson Reuters ESG Research Data
This rating agency is measure their rating scale on the basis of providing data related with
raw to their potential business investors. More than of 6000 companies rating has been measure

by this organization. They use percentile rating and give grades to companies which fulfil criteria
of sustainability to organizations. They measure and rate organizations performance on the basis
of data collected by using public domain. They on the basis of analysing more then of 150
indicator given rating which is based on 10 rating scale. They includes indicator as human rights,
workplace discrimination, environment diversity, resource use for production purpose,
contribution towards social responsibility work for organizations and social groups. On the basis
of that they decided and give them rating. Particular criteria has been set out and companies
review on the basis of that criteria. In according with ESG categories high rating on the other
side in case of measuring social performance low rating is given to this agency rating
measurement method and in case of measuring governance indicator medium rate is given to
this agency rating.

1.5 Research aims and objectives

REFERENCES
Books and Journals