Institutional Shareholder Services (ISS) ESG

Institutional Shareholder Services (ISS) ESG


Institutional Shareholder Services (ISS) ESG 1

Formation and Background 2

Key Components of ISS ESG Indicators 2

1. ESG Corporate Rating 2

2. ESG Performance Score 3

3. SDG Impact Rating 3

4. ESG Fund Rating 3

5. Raw ESG Data 3

Methodology and Research Process 4

Accessing ISS ESG Indicators 4

1. ISS ESG Indicators 5

2. Number of Indicators 5

3. Purpose of Having Many Indicators 6

Overview of ISS ESG Indicators 6

Environmental (E) Indicators 6

Social (S) Indicators 7

Governance (G) Indicators 7

Summary: 8




Institutional Shareholder Services (ISS) ESG

 is a leading provider of environmental, social, and governance (ESG) research, ratings, and analytics. It helps investors and stakeholders assess companies’ sustainability practices and governance quality, enabling informed investment and engagement decisions. ISS ESG focuses on evaluating companies on three pillars: Environmental, Social, and Governance, using detailed indicators, data, and scoring methodologies. It also provides SDG impact ratings, ESG fund ratings, and raw ESG data for investors.

Formation and Background

  • Founded: ISS itself was founded in 1985 in the United States.

  • Founder: Sarah H. Williamson and colleagues established ISS as a proxy advisory firm to provide guidance to institutional investors on shareholder voting and corporate governance.

  • Evolution into ESG: Over time, ISS expanded its services beyond corporate governance to include ESG research and ratings. This division is now known as ISS ESG, which operates as part of ISS Corporate Solutions, a subsidiary of Institutional Shareholder Services Inc.

  • Headquarters: ISS is headquartered in Rockville, Maryland, USA, and operates globally with offices across Europe, Asia, and other regions.

Essentially, ISS started as a corporate governance advisory firm and evolved to become a major ESG research provider that guides investors on sustainable and responsible investment decisions. (issgovernance.com)

Key Components of ISS ESG Indicators

1. ESG Corporate Rating

The ESG Corporate Rating evaluates a company's ESG performance across three pillars: Environmental, Social, and Governance. Companies are assigned a letter grade ranging from A+ (excellent) to D- (poor), based on their adherence to industry-specific standards and overall ESG practices. A "Prime" status is granted to companies that meet or exceed the minimum performance threshold for their industry. This rating is updated annually, with interim updates triggered by significant events or new information. (insight.factset.com, Bankhaus Metzler Startseite, asuene.com)

2. ESG Performance Score

The ESG Performance Score is a standardized measure that allows for cross-sector comparisons. It ranges from 0 to 100, with 50 representing the "Prime" threshold. This score is derived from over 130 raw metrics, covering more than 30 universal ESG topics, and is updated regularly to reflect the latest data and developments. (Bankhaus Metzler Startseite, insight.factset.com)

3. SDG Impact Rating

The Sustainable Development Goals (SDG) Impact Rating assesses a company's positive or negative impact on the 17 UN SDGs. Companies are rated on a scale from -10 (significant negative impact) to +10 (significant positive impact), based on over 100 data factors. This rating provides a holistic view of a company's contribution to global sustainability objectives. (ISS-Corporate)

4. ESG Fund Rating

The ESG Fund Rating evaluates the ESG performance of equity and bond funds globally. It is derived from the ISS ESG Corporate and Country Ratings, offering investors insights into the sustainability of their investment portfolios. (ISS-Corporate)

5. Raw ESG Data

For investors seeking detailed, unprocessed ESG information, ISS ESG provides a comprehensive set of environmental, social, and governance datapoints. This raw data allows for customized analysis and modeling, enabling investors to tailor their strategies to specific ESG criteria. (issgovernance.com)

Methodology and Research Process

ISS ESG employs a rigorous research process that includes:(insight.factset.com)

  • Analyzing over 4,500 media outlets and more than 150 stakeholder sources.

  • Reviewing company reports, websites, and specific ESG impact data.

  • Engaging in dialogue with companies every two to three years for feedback.

  • Updating ratings based on significant incidents, corporate actions, or new information.(insight.factset.com)

This approach ensures that the ESG ratings reflect the most current and comprehensive information available.

Accessing ISS ESG Indicators

Investors and stakeholders can access ISS ESG indicators through various platforms:

  • ISS ESG Gateway: An online portal providing public access to corporate and fund ESG ratings and scores.

  • ISS ESG Index Solutions: Offers indices like the Governance QualityScore Index and the US Cyber Risk Index, based on high-quality ESG data. (ESG Today, issgovernance.com)

These resources enable users to evaluate and compare companies and investment funds based on their ESG performance.

  1. ISS ESG Indicators

    • ISS ESG evaluates companies using over 100–200 individual indicators.

    • These indicators are grouped under three pillars:

      • Environmental (E): Climate change, resource management, emissions, pollution, renewable energy, etc.

      • Social (S): Human rights, labor standards, diversity, community impact, product responsibility, etc.

      • Governance (G): Board structure, shareholder rights, business ethics, transparency, risk management, etc.

  2. Number of Indicators

    • According to ISS ESG methodology documents, more than 130 “raw” metrics are typically used to calculate the ESG Performance Score.

    • When you include sub-indicators, industry-specific indicators, and additional SDG impact metrics, the total can approach around 200 distinct data points or indicators.

  3. Purpose of Having Many Indicators

    • To capture industry-specific ESG risks and opportunities.

    • To allow a granular and comparative assessment of companies across sectors.

    • To generate ESG ratings, scores, and SDG impact ratings that investors can use for portfolio decisions.


Overview of ISS ESG Indicators

Environmental (E) Indicators

  • Climate Change: Greenhouse gas emissions, carbon intensity, climate risk exposure.

  • Resource Management: Energy consumption, water usage, waste management.

  • Pollution: Air and water pollution levels, chemical use, hazardous waste.

  • Biodiversity: Impact on ecosystems, deforestation rates, land use changes.

  • Product Stewardship: Sustainable product design, recycling initiatives.

Social (S) Indicators

  • Labor Practices: Employee health and safety, labor rights, working conditions.

  • Human Rights: Child labor, forced labor, community impact.

  • Diversity & Inclusion: Gender diversity, minority representation, equal opportunity.

  • Product Responsibility: Product safety, customer satisfaction, ethical marketing.

  • Supply Chain: Supplier labor standards, sourcing practices, supply chain transparency.

Governance (G) Indicators

  • Board Structure: Board composition, independence, diversity.

  • Executive Compensation: Pay equity, incentive alignment, transparency.

  • Business Ethics: Anti-corruption policies, bribery prevention, ethical conduct.

  • Risk Management: Internal controls, audit practices, crisis management.

  • Shareholder Rights: Voting rights, shareholder engagement, transparency.

Summary: 

While there isn’t a fixed “200 indicators” rule, ISS ESG does use 130–200+ indicators, depending on how broadly you count sub-metrics and SDG-related measures.

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