The Impact of ESG Ratings
05 December 2022 00:00
Environmental, Social and Governance (ESG) ratings have been used by academic researchers for years to understand the social and environmental impact of companies. In recent years, however, these ratings have become more important to the companies themselves. A company's ESG rating is now often used by investors to assess risk and potential return. For this and other reasons, many companies are now incorporating ESG factors into their decision-making processes.
ESG ratings are based on a company’s environmental, social, and governance practices. These ratings are important because they can impact a company’s reputation and, as a result, its bottom line. Good ESG ratings can attract investors, customers, and talent, while poor ratings can lead to higher costs of capital, lost business, and difficulty attracting and retaining employees.
According to MSCI, “companies with lower ESG scores had a higher cost of capital, higher volatility due to controversies and other incidences such as spills, labor strikes and fraud, and accounting and other governance irregularities.”
A Generational Shift to Sustainability
There are many reasons why ESG ratings play a larger role year-over-year in determining business success, but one of the biggest is the younger generations and their increasing impact on consumer and employment standards. Millennials and Gen-Z, more than any previous generation, look to hold unethical businesses accountable and encourage businesses to take a progressive role on how they treat not only their employees but the world around them.
Millennials and Gen-Z are the most sustainability-conscious generations yet. In fact, 83% of millennials would be more loyal to a company that helps them contribute to social and environmental issues, according to Cone Communications. And 73% of Gen Z consumers surveyed were willing to pay more for sustainable products, more than every other generation, per First Insight. Clearly, the younger generation cares about ethical and sustainable business.
Colleges and universities in particular have a responsibility to their students, staff, and shareholders to make ethical decisions. Many schools are now turning to ESG ratings to help them make informed decisions about where to invest their money. ESG ratings can help colleges and universities screen out companies with poor environmental or social records.
In addition, ESG ratings can help colleges and universities identify companies that are leaders in sustainability. This leads to improved alignment with the younger generation of students entering higher education and eliminates the risk of protests and lost tuition from those students if institutions were caught investing with unethical or unsustainable organizations.
ESG Ratings in Nexis Uni
As the younger generation increasingly enters both the workforce and the world of academia, ESG ratings continue to increase in relevance for businesses, investors, and academic institutions alike. Providing students access to ESG ratings to conduct business, political and journalistic research is pivotal to keeping up with the demand of insight from private industry and consumers. To help include academic researchers and future leaders stay ahead of the curve, Nexis Uni provides all users with access to CSR hub ESG ratings for over 30,000 organizations and businesses. Students and faculty with access to Nexis Uni can use these ESG ratings for research and projects that help contribute to the progressing standards of sustainability in our global economy.
For more information on how to access ESG ratings in Nexis Uni, students and faculty can use our ESG Ratings Tip Sheet for step-by-step instructions on finding and exporting them. If you are not a Nexis Uni customer and want to learn how you can bring ESG ratings to your institution, reach out to our Sales Team today.
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