Describe how you define materiality and how this is captured in your research and/or rating methodology as well as final product.
ESG Riscum Assessment (ERA) methodology has been developed by ESG Invest in order to support investors capture ESG risk and opportunities and integrate these factors into portfolio construction and management processes. ESG Invest rating methodology is conceptually sound as it is based on stringent international standards and regional strategic roadmaps and national visions across the Middle East.
ESG Invest’s ESG Riscum Assessment methodology highly values material sustainability factors that can affect operational and financial performance of companies from a risk management perspective. The methodology applied is based on the principle of materiality which combines the two following conceptual models:
Stakeholder Model: An assessment of the sustainability concerns/exposure/vulnerabilities of different stakeholders that the reasonable investor cares about and have the potential to impact corporate performance.
Shareholder Model: An assessment of the level of assurance that the company’s management (or mismanagement) of the sustainability issue will affect: i.e. profits (revenue and/or costs), assets and liabilities, and cost of capital using an ESG risk materiality perspective.
ESG data is collected and analysed using corporate and stakeholder sources:
- Public corporate documentation (ex: annual reports, corporate governance reports, sustainability reports, corporate websites, stock exchanges announcements).
Reporting in Arabic, English, and French is considered in the ESG assessments.
- Direct exchange with companies (Investor Relations and CFOs) to confirm the accuracy of the data reported.
- Stakeholders’ information (ex: Media, NGOs).