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Ethics Metrics LLC

Service Providers Framework 2019

You are in Research and Data Provision » Research/process level

Research/process level

RDP 02. Sources for research and/or rating

02.1. Indicate the types of sources you use for research and/or ratings of companies/sectors/geographies or similar. Tick all that apply.

02.2. Indicate how ESG factors are incorporated into your research and/or rating methodology

02.3. Describe how you define materiality and how this is captured in your research and/or rating methodology as well as final product.

          Material information is defined from litigation and enforcement actions, which apply federal laws and regulations on banking and securities fraud. Material compliance with sound governance, code of ethics and financial performance qualify as Ethics Metrics Ratings of 1 and 2. Material violations on governance, compliance, disclosures and potential dangers of default, default and systemic risks, based on quarterly financial data, qualify as Ethics Metrics Ratings of 3 to 9.

02.4. Additional information. [OPTIONAL]

RDP 03. Stakeholder input (Not Applicable)

RDP 04. Up-to-date assessment and ratings

04.1. Indicate how you ensure that your ESG assessment of companies/ sectors/ geographies or similar is up-to-date and that new information is incorporated or new assessments are conducted at reasonable intervals.

04.2. Additional information. [OPTIONAL]

RDP 05. Balanced research and assessment

05.1. Indicate how you typically ensure a balanced approach to your research methodology and assessing/rating of companies/sectors/geographies or similar. Tick all that apply and explain your approach to each option.

Type of indicators

Explain your approach

          The Ethics Metrics system maps, measures, models  and rates interconnected U.S. banking and securities laws and regulations with the financial performance of each DIHC based on the standards established by Congress for federal bank regulators and by historical formal enforcement actions and litigation cases by federal bank regulators, the SEC and Department of Justice from 2002 to the present.

Explain your approach

          Each whole number in the Ethics Metrics Credit Rating Scale of 1 to 9 includes a decimal point to highlight improving or deteriorating trends each quarter.

05.2. Additional information. [OPTIONAL]

RDP 06. Consistency and comparability

06.1. Describe the control processes in place to ensure quality of research.

          DIHC Rating Reports are evaluated and improved with insights from regulatory authorities.

06.2. Additional information. [OPTIONAL]

RDP 07. Emerging ESG issues and trends

07.1. Indicate whether you identify and prioritise ESG issues and emerging trends.

07.2. Describe how you incorporate the identified ESG issues and trends in your product offerings and business activities.

          New relevant federal banking and securities laws, for safe and sound banking for private and publicly traded DIHCs plus formal enforcement actions and settled securities and accounting fraud cases, are incorporated into the Ethics Metrics model and related Ethics Metrics Credit Ratings of 1 to 9. Ratings of 1 and 2 qualify as sound governance, compliance and financial performance. Ratings of 3 to 9 qualify as violations of governance, compliance and SEC required disclosures. They also qualify as dangers of default and potential default, systemic risks and orderly liquidation or bankruptcy.

07.3. Additional information

RDP 08. Client use of outputs

08.1. Describe how research and data provision outputs are used by clients.

Describe how research and data provision outputs are used by clients.

Ethics Metrics Credit Ratings are used to bring transparency and thus actionable intelligence to information asymmetries at the DIHC level and within inefficient markets and all asset classes for all large DIHCs. This enables clients to maximize gains and minimize losses with DIHC money markets, fixed income, and OTC derivatives which are generally underpriced and for DIHC equity investments which are generally overpriced due to at least 10 years of information asymmetries with many of the large DIHCs. Additional insights are provided in the Comprehensive Paid Engagements led by Ethics Metrics on the PRI's Collaboration Platform.

08.2. Additional information. [OPTIONAL]

RDP 09.