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Potential Applications of ESG Risk Ratings for Investors

ESG

Investors now have a tool to assess a company’s sustainability performance in addition to its financial success, thanks to ESG risk ratings. This is crucial because investors are searching for businesses that show a dedication to sustainability and corporate responsibility. ESG risk ratings offer a standardized method to assess and contrast firms’ ESG performance, which may assist investors in making value-aligned investing decisions.

To improve investment decision-making and encourage sustainable investing habits, this whitepaper seeks to provide investors with a better knowledge of the potential uses of ESG risk ratings.

Key Takeways

  • In recent years, the demand for ESG ratings has skyrocketed. Even though it has existed for a decade, the term "ESG" was seldom used by the investing community or in company boardrooms.
  • Companies that successfully manage ESG risks will stand out from their competitors and draw in investors who value ESG performance.
  • ESG risk ratings offer insight into how exposed a company is to ESG variables that could affect its long-term performance, which can assist investors in identifying possible risks and opportunities.
  • Investors may also utilize ESG risk ratings by adjusting the weighted average cost of capital (WACC) to consider ESG risks.
  • Best-in-class strategies (BIC) strategies invest in companies with greater ESG risk ratings than their competitors in the same industry.
  • Investors may be able to lower the risks associated with subpar ESG performance and gain from the long-term development potential of sustainable themes by investing in firms with good ESG profiles.
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ESGESG RisksSustainability

About SG Analytics

SG Analytics is a leading global data solutions firm providing data-centric research and contextual analytics services to its clients, including Fortune 500 companies, across the Financial Services, Technology, Media & Entertainment, and Healthcare sectors. Established in 2007 and a Great Place to Work certified company, SGA has over 1600 employees and has a presence across the US, the UK, Switzerland, Poland, and India.


Besides being recognized by analyst firms such as Gartner, Everest Group, and ISG, SGA has been part of the elite Deloitte Technology Fast 50 India 2024 and APAC (Asia Pacific) 2025 High Growth Companies by the Financial Times & Statista.

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