In the evolution of our ESG Research Methodology :
- Vigeo Eiris Rating has a Thematic Expert Structure in place, with managers, for the following issues: Human Rights, Human Resources, Corporate Governance, Community Involvement, Environment, Business Behaviour and Emerging Issues. 
- Periodically, these expert groups engage in projects designed to develop evolutions of our methodology, under the guidance of the Director of Methodology
- This process can involve engagement with external stakeholders to provide input, opinions on our research frameworks and indicators etc.
•	e.g. Transparency International involved in the development of our Lobbying Criteria.
•	e.g. WWF France involved in the development of our Biodiversity Criteria. 
•	e.g. In 2015 EIRIS introduced new criteria for Retail Banking and Corporate Loans (which incorporated best practices from the Equator Principles and UNEPFI), and additional criteria for Fossil Fuels (reflecting emerging interest in de-carbonization strategies).

In the Research Process itself (Company engagement) :
•	In our rating process we seek to drive a transparent and meaningful dialogue with the companies that we are rating and provide them with multiple opportunities to provide inputs on the rating. Companies are provided with questionnaires, information on any allegations and indeed a draft version of the report in order to give their input. 
•	In 2016, we launched our new online platform (VE CONNECT) for Rating companies, which provides them with their full questioning framework across multiple products (Research - Screening - Controversies), the existing opinion of the agency, the ability to download elements of our existing opinion on them, and provides companies with the opportunity to provide feedback at any time. 
•	When writing ALERTS on companies due to major events, where there is no official statement from a company on the event itself, companies are systematically engaged and requested to provide feedback to us. 
•	For the Convention Watch Service we have extensive dialogue with companies (as well as other Stakeholders) in order to understand how they have dealt with alleged breaches of international norms and how they intend to improve policies and management systems to prevent future potential breaches.

In the Research Process itself (External Stakeholders) :
•	Vigeo Eiris has established contacts with a range of external stakeholders at both sector and also thematic levels. For example, Vigeo Eiris has signed agreements with two global union federations (UNI and IUF) and has contacts with other trade unions or NGOs such as  IndustrialALL, Transparency International and BankTrack etc.
•	Internally, we have documentation breaking down the external stakeholders whose feedback on companies we look to integrate on a GENERIC (Business and Human Rights, OECD Watch) and SECTOR SPECIFIC basis (IUF Union, Food Navigator, FDA website). 
•	At the start of our rating process, teams are required to engage with key contacts, provide them with the list of companies that are to be rated in the course of a sector update, and request information from them for use in the Rating process. 
•	Within the scope of our research process we also have access to a range of external information for example: data from the Carbon Disclosure Project, from OECD Watch, from the Business and Human Rights Resource Centre and other stakeholder sources.
•	We also have FACTIVA ARCHIVE accounts that provide us with all available press materials related to the companies that we follow, across hundreds of international press sources. 
•	For the Convention Watch Service we have extensive dialogue with stakeholders in order to understand their perspective on how companies have dealt with alleged breaches of international norms and how they would wish to see them improve policies and management systems to prevent future potential breaches.

At our Governance Level:
Vigeo Eiris has an independent Scientific Council in place that provides opinions and oversight across the full range of Rating Department and Enterprise Department activities. The Scientific Council is composed of  four independent members and it has the following purposes: 
•	to examine the methodology principles and rules applied to our products before they are launched,
•	to ensure the scientific monitoring of the rating activity, including compliance with the application of methodology,
•	to provide an opinion in case of a dispute between a rated company and Vigeo Eiris (concerning the method used), and 
•	overall, the Scientific Council provides an external set of opinions and inputs over the global work of the organisation.
        

          Materiality of our Equitics© Research

(1)	Integrating Material ESG Issues into our Generic Model:
•	Our ESG Research Framework begins with a Generic Model derived from international reference texts and standards. 
•	This model is periodically updated over time to bring in (or refine) indicators on existing, evolving and emerging ESG issues. 
•	This model currently contains 38 criteria organised within 6 domains (Human Rights, Human Resources, Community Involvement, Environment, Corporate Governance and Business Behaviour). 
•	Vigeo Eiris is currently using version 15 of its Generic Model for Equitics © research.
•	Recent evolutions (2015 - present) at this Generic Model level include the inclusion of updated questioning on: Tax Transparency, Offshore Financial Centres, the Integration of ESG issues into all elements of Corporate Governance, Human Rights Due Diligence, Supply Chain Due Diligence indicators, additional indicators on the Prevention of Corruption, Environmental Strategy, Non-Discrimination and Diversity, the Physical Impacts of Climate Change and more. 
•	These updates are collaborative efforts requiring the inputs of Thematic Expert Leaders as well as the Director of Research, the Director of Methodology and Institutional Relations and other relevant stakeholders in the organisation. 

(2)	Sector Specific Frameworks: 
•	An additional task for our ESG Research teams is the installation of a SECTOR SPECIFIC framework for researching a company.  This process takes our Generic Model, and makes it more material for the sector under review.
•	Through this process, our generic reference moves from 38 criteria to the concrete analysis and activation of around 22 (on average) criteria per sector. 
•	Today, Vigeo Eiris has 41 sector models in place: e.g. Specialised Retail, Diversified Banks, Mining and Metals etc. Within these 41 sectors models, there are also sub-sectors. 
•	Part of this step requires the ‘weighting’ of criteria in order to determine what the most material elements for the assessment of a company are. There are three components that are used in this weighting process. 

(a) Component 1 – the Nature of Stakeholders Expectations: 
- this is assessed on a 3 level scale.
- Fundamental expectations, Essential expectations, Legitimate expectations. 

(b) Component 2 – the Vulnerability of Stakeholders: 
- this is assessed on a 3 level scale. 
- High, medium and low levels of vulnerability. 
- When making this determination in the Environmental section of our research, we examine the volume of related flows/emisisons (high, medium and low). 

(c) Component 3 – the Risks/Opportunities that companies might face linked to their management of these issues: 
- Using our risk typology, we determine which of the following types of risk might be linked to the company’s management of this issue (legal, human capital cohesion, reputational risk, operational efficiency, market, and transparency). 

Following this process:
- Criteria effectively end with a weight of 0-1-2 or 3. 
- Criteria with a weight of 0 are not activated (not-analysed) for a sector as they are not considered to be material. 
- The Overall Score of a company is calculated on the Weighted Average of the Performance in Criteria. 
- This ensures that the overall score of a company is based predominantly on the criteria that are considered to be the most material. 

(3)	Materiality in our Risk Analysis : The Mitigation Index
- As well as providing ESG scores to clients, built upon the most material elements of a company’s ESG performance, we also provide a range of risk metrics to clients. 
- Therefore, as well as weighting all criteria in our methodology, we also provide a Risk Class Weighting to each criteria. 
- This follows the logic that a strong level of performance on Water Management is more likely to have a positive material impact on a company’s operational efficiency (reducing costs) than it is on its Human Capital cohesion. 
- Effectively, through this process we determine the link between performance on an ESG criteria and risk management.
- As a result of this, another dimension of materiality is added to our assessment of companies based on a Risk Mitigation Index.

(4)	Materiality in our Risk Analysis : The Risk Matrix. 
- For all companies rated in the Equitics© methodology, we also develop a RISK MATRIX at the close of their rating. 
- This matrix shows the ‘weight’ of the criteria under review (1-2-3) as well as the level of performance of the company (weak-limited-robust-advanced)
- Based on this matrix, analysts are able to provide commentary to our clients on how a company’s ESG performance enables them to manage (or not) ESG risks and opportunities.


Organisationally, there is a continuous monitoring of material issues:

- Our Sector Teams are required to continuously monitor material ESG issues within their sectors and propose where necessary, evolutions in aspects of the analysis framework. 

Vigeo Eiris has 8 sector teams today: 
- Food and Health Team. 
- Energy Team. 
- Basic Resources Team.
- Finance Team.
- Services Team.
- Telecommunications Technology and Hardware Team.
- Infrastructure Team. 
- Industrials Team. 

- Our Thematic Expert Groups are required to continuously monitor material ESG issues within their thematic context and propose where necessary, evolutions in aspects of the analysis framework. Vigeo Eiris has eight Thematic Expert Groups in place today: Human Rights, Human Resources, Corporate Governance, Business Behaviour, Environment, Community Involvement, and Emerging Issues. 

- Proposals for evolution can vary in terms of complexity and scope from refinement of a single indicator, to the inclusion of new KPIs, the creation of a new block of questioning, the creation of a new criterion or the refinement of scoring instructions for analysts. 

- All of this work is overseen by the Director of Methodology
        

          1) Equitics© Rating Process: Vigeo Eiris rates companies’ full ESG performance within a two year cycle. We are currently moving to annualising our rating process whereby all companies within our research universe will be updated each year. 

2) Alerts System: All companies within our research universe may have their scores and ratings adjusted at any time through our Alerts Products. There is a range of types of alert that the Agency might issue dependent on circumstances:  

•	Upgrading Alerts: scores/ratings are positively increased on the basis of an event. Normally the company is issuing a major new policy initiative, or undertaking a form of activity beyond the normative expectations for companies from that sector. 

•	Monitoring Alerts:  an event has ‘broken’ although the full impacts and level of culpability are not yet clear. However, we indicate to clients that we are closely monitoring the issue and provide preliminary information on potential risks, opportunities for companies involved. 

•	Confirmation Alerts: an event has taken place. However, as a result  - we confirm that our existing opinion on the company (scores and ratings) remain valid. 

•	Downgrading Alerts: an event has taken place that leads us to downgrade out opinion on the company (downgrading of scores and ratings). 

•	M&A Alerts: two companies within our research universe are in the process of either a merger, or one is acquiring the other. As a result, we produce an alert for investors outlining the potential synergies between the two entities from an ESG risk management perspective and also outline any potential ESG risks linked to weaknesses in their profiles overall. 

3) Controversy Database: 
•	Separate to our Equitics © research, we have a product that produces a detailed breakdown of the controversies that a company faces. 
•	A dedicated team continuously update this product with any credible stakeholder allegations related to the activities of any company in our research universe and associated with our ESG rating framework. 
•	Depending on the gravity of the controversy, this may lead to an alert that does impact the Equitics© scores and ratings. 
•	The Convention Watch product also provides an assessment of how companies address  more serious allegations and incidents, using published information and companies’ responses.

4) VE Connect: 
•	In 2016, Vigeo Eiris began the roll out of its online company platform. 
•	This tool effectively provides rated companies with permanent access to their rating (questions/existing opinion) and space for them to continuously provide additional information and commentary to their analyst. 
•	Companies see in real time adjustments to controversy opinions.
•	This will in effect, make the ratings and the research of companies more dynamic and flexible in the sense that they will always be able to provide up to date information, and the agency will always be able to receive and store their inputs. 
•	Please note that this tool does not automatically ‘score’ companies. Analysts are still required to treat the information that is provided by companies and determine its material relevance to our rating framework.
        

          The Equitics ©  methodology & process guarantees the impartiality of our analyses and ratings, equal treatment for all companies under review, reproducibility of the rating by different analysts over time, and the traceability of information collected. This is achieved through the different tools, processes and organisational functions outlined below: 

Consistency of the Rating Model Selection:
- the allocation of a company to a specific rating model is controlled by dedicated internal functions (Universe Rating Administrator,  Index Support and a  Centralised Customisation Control Team).

Consistency & Comparability across Sector Models:
The following elements are consistent across all of our sector models ensuring a level of consistency and comparability: 
1. The criteria are always structured into three pillars of questioning (Leadership, Implementation and Results). 
2. Each of these pillars always contributes the same value to the scoring of a company on that criteria (33% for each pillar)
3. Each criteria is assigned a weight using the same criteria weighting methodology across sectors.
4. The calculation of scores and ratings always follows the same formula across all sectors and regions.
5. The final calculation of scores and ratings is automatized. 

Consistency of Rating Process:
- all companies  rated in the Equitics © universe are rated by applying the same process and companies are always contacted for prior to rating and for feedback.  

Consistency of Quality Process: 
- all companies rated in the Equitics© universe are subjected to the same quality control process. 
- this process is more intensive for new analysts who have additional controls compared to more experienced analysts. 
- a key part of our quality processes for sector research include what we call a ‘transversal re-reading’ whereby the scores and commentary across the sector is examined for consistency, comparability and for major changes in opinion. This is systematically undertaken for all companies that we rate. 
- this process is undertaken only by accredited personnel. 

The Software used for Research:
- All ratings are carried out on our proprietary software. 
- The software used by the organisation acts as a historical repository so that teams are able to see all previous opinions on a company. This allow for comparisons from one rating to the next for a given company. 
- The software used by the organisation also enables analysts to compare at question level granularity, the distribution of scores across a sector to ensure comparability and consistency. 
- Within the software used to score companies in the Equitics © methodology, analysts are only able to select from four scoring levels per question (1-2-3-4). This limits deliberately their level of flexibility and ensures that they are only able to award values to a company based on predetermined and validated indicators. This helps guarantee reproducibility of the rating over time by different persons.
- Consolidated scores and ratings are calculated automatically by the software removing human error risks. 
- When analysing companies on which we have an existing Agency opinion, our software enables them to view clearly the pre-existing quantitative and qualitative commentary. 
- This then ensures higher oversight over changes that are made (the analyst must be able to objectively demonstrate changes/evolutions) to justify the changes in the assessment.
- When an agency opinion has been controlled and finalised, it is effectively “locked” so that no analyst is able to readjust the scores, ratings and commentary (this can then only be changed through a formal process involving the Quality Manager). 

Organisational Elements:
- Each team has a Research Manager in place who is designed to be the first line of additional support for an analyst in the case of complex situation linked to a rating (abnormal levels of pressure from a company, aggressive behaviour from a company, a complaint from a company etc.). 
- In addition, Vigeo Eiris has the following functions in place designed to provide additional support to teams in specific cases: the Quality Manager and the Compliance Officer. 
- Our ESG analysts are organised into eight specific teams in order to build both their sectoral expertise, but also to nurture consistency in approach to scoring issuers in their sectors. 
- Vigeo Eiris has a Thematic Expertise group in place that is designed to provide cross sectoral expertise and scoring support for teams. They also periodically will conduct audits and internal controls on how analysts apply the methodology across sectors.