New Platform Allows Institutional Investors to Monitor ESG Risks

(September 8, 2011) — GovernanceMetrics International has launched a new product to provide investors and corporate stakeholders with an evaluation of public company Environmental, Social and Governance (ESG) risks.

The platform, called GMI Analyst and available through subscription, will produce an ESG Rating — measuring long-term sustainable performance — as well as a Risk Rating, identifying companies facing risks over one to two years of litigation and regulatory actions and other negative events that can harm a company’s market valuation. According to a release on the new product, GMI Analyst ratings will be built on a model that examines, among other areas:

1. Governance — Includes areas such as board accountability and effectiveness, executive pay, firm ownership and control and takeover defenses.

2. Environmental — Metrics of major importance include issues such as climate change risks and disclosure, environmental reporting; board-level governance, supply chain risk and monitoring, and environmental management systems.

3. Social — Areas of critical importance include vendor standards, employee relations, bribery and corruption, diversity and political contributions.

4. Accounting — With accounting transparency being a major part of governance risk, accounting metrics will focus on how companies recognize revenues and expenses and how they value assets and liabilities.

“The need for ESG research continues to grow, as investors and other corporate stakeholders recognize the impact that governance, environmental and social factors can have on company performance and risks,” said Jack Zwingli, CEO of GMI, in a statement. “We have a strong track record of linking ESG metrics and ratings to risks and returns, and GMI Analyst will provide actionable research to support informed decision making.”

Zwingli continued: “Companies have long been valued on fundamental financial analysis — whatever can fit into a spreadsheet…There is, however, a growing body of acceptance among asset owners, asset managers, corporate board members and other stakeholders that ESG factors are equally relevant in determining the value of a company. You need look no further than the latest governance disasters to recognize the need to incorporate ESG research into investments, disclosure and risk management.”