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Risk rating trends highlight blindspot in ESG perspective of global companies

Companies across the globe are readying themselves for the disruption of the transition to a more sustainable world.
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06/06/2022 · 4 min read

Companies across the globe are readying themselves for the disruption of the transition to a more sustainable world. This has led to a focus on governance in ESG risk rating scores – but are companies giving enough attention to environmental and social risks?

The following analysis is drawn from scores obtained by organizations completing Marsh’s ESG Risk Rating between March 2022 and May 2022. The insights include ESG performance by industry, region, revenue and headcount.

Aside from the life sciences sector where companies had an ESG score of 7 out of 10, ESG scores by industry were between 4 and 6. The variation, however, was evident in how that score was derived from the three elements — E, S, and G.

Generally, those industries making headway in governance had higher overall scores.

But, for all industries, the average E-score was the lowest of the three, with differentiation of only 1.54 between scores – excluding life sciences.

Both UK and Ireland and the Middle East and Africa (MEA) regions had ESG scores above the global average. This low E-score trend is seen again when looking through a geographic lens. Also, the S-score is bolstered in regions with reserves of non-renewable resources, as well as in regions with legacy sustainability initiatives, such as Asia.

The size of a company is not a key factor in its ability to achieve a relatively high ESG score. Indeed, companies with less than US$10 million annual revenue; those with between US$101 million and US$500 million annual revenue; and those with over US$1 billion all had ESG scores higher than the overall average.

There is also very little variation in ESG and element between companies with varying sizes of workforce.

However, companies with less than US$10 million turnover (T/O) are leading the charge when it comes to the E-score. There is a score difference of 0.71 between the companies with the smallest turnover and those with US$101 million to US$500 million, who had the second highest E-score. This is a significant gap, given there is a 0.92 score difference between the second highest E-score and the lowest.

Life sciences ESG performance 7/10

Global average UK & Ireland and MEA

In summary

Whichever way you slice it, companies — irrespective of size or location — need to turn their attention to the E in ESG. More needs to be done to assess the long-term and strategic risks and opportunities associated with the environment and environmental change.

Use our ESG Risk Rating tool to find out more about your companies rating; get a better understanding of your ESG performance and the impact it is having on your risk profile.

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