ESG Framework Mapping Project

ESGgen 9 The Regulations 9 ESG Framework Mapping Project

The ESG Framework Mapping Project

The ESG Framework Mapping Project was commissioned in October 2021 to independently assess the coverage of the EU Taxonomy (EUT) provided by the leading ESG frameworks. The EUT is selected as the baseline because it is the most complete mandatory framework. The study was completed and reported in November 2021.

ESG Value and Risk Audit

Project Goal

Compare leading ESG Frameworks to independently assess their alignment to the SFDR (EU Taxonomy)

 

Lead Researcher

Paramjot Singh
Research Lead, Centre for Research into Energy Demand Solutions, University of Oxford; Researcher, Energy & Environmental Engineering, King’s College London

Methodology

Sample: Widely adopted ESG Frameworks and Principles, EU Taxonomy (EUT)

Method: Frameworks are mapped metric-by-metric to assess their alignment with each other and with EUT

Alignment scoring: Each metric is assigned an alignment score (0-3) where: 0 = not aligned (<25%), 1 = partially aligned (>50%), 2 = significantly aligned (>75%), 3 = completely aligned (100%)

Validity: Alignment scoring is conducted independently by each scorer and cross-scored for consistency

kings college london
university of oxford
creeds

Key findings

The ESG frameworks studied: a quick guide

esg frameworks compared
B CORP
B CORP describes itself as a “social movement” in which companies pay to be certified as a B Corporation. To become a certified B Corp your organization must complete and pay for the B Impact Assessment (BIA) which evaluates how the company’s operations and business model impacts its workers, community, environment and customers. A company doesn’t have to meet any specific criteria (for example, setting and meeting targets to reduce greenhouse gas emissions) to become a B Corp. Instead, companies must score a minimum of 80 on the B Corp impact assessment, which comprises 200 questions about the company’s operations and business model. Certification is done chiefly over the phone, with around 10% of companies selected for more in-depth review. Certificates can be renewed every three years. 
CFA
The CFA’s Global ESG Disclosure Standards for Investment Products aims to make it easier for investors to understand and compare ESG labelled products. The standard’s parameters are product objectives, investment process, stewardship activities and disclosures. The standards apply to all types of investment vehicles such as pooled funds, ETFs, insurance-based investments products, and managed accounts, and span all asset classes from listed equities to fixed income, private debt and equity, infrastructure and real estate. Additionally, the standards are aimed at covering approaches to ESG investing such as ESG integration, exclusion, screening, best-in-class, thematic, sustainability themed investing, impact investing, and stewardship, and consider both passive and active strategies. For investment managers, the standards are designed to reduce the firm’s legal and compliance risk, facilitate sales and distribution and increase efficiency responding to requests for proposals and due diligence questionnaires. 
ESG_VC
ESG_VC is a questionnaire that asks for a mix of company intention and impacts. Companies can select which measures they report on and are only scored on those measures. It is based on the National Social Value (TOMs) Measurement framework for measuring social value. The primary result of a submission is a numerical score for each E, S and G pillar. Any answer involving ‘Yes’ or submitting a numerical score provides 2 points, an answer of “No – but plan to in the next 12 months” or “We plan to report this metric in the next 12 months” provides 1 point and an answer of “No” provides 0 points. The initiative is promoted by Beringea (a Venture Capital Firm) as “an industry initiative”. Beringea are investors in Social Value Portal which provides the TOMs measurement framework.
ESGgen
ESGgen is a platform for standardising the auditing and reporting of ESG metrics designed specifically for small and medium sized enterprises/businesses (SMEs/SMBs). ESGgen claims to be “the first ESG accounting platform, purpose built for SMEs”. Certified Public Accountants (who have also been certified in ESG) test real data and documentation that’s already in the business and calculate ESG impacts to produce a set of ESG Accounts (just like financial accounting). ESG impact is measured using a proprietary scorecard of 8 environmental, 15 social, and 6 governance measures plus 2 policy statements. An additional report details the value created and value at risk of a company’s ESG impacts.
GRESB
GRESB is focused on real estate. It is used predominantly by investors to assess the sustainability performance of real estate and infrastructure portfolios and assets. GRESB Assessments aim to provide investors and asset managers with material insights into the sustainability performance of a company’s real assets. Assessments are aligned with international reporting frameworks such as the Global Reporting Initiative (GRI) and Principles for Responsible Investment (PRI). Assessment participants receive comparative business intelligence on where they stand against their peers, a roadmap with the actions they can take to improve their ESG performance and a communication platform to engage with investors. The GRESB Real Estate Assessment requires companies to compile and report asset level data such as green building certification, stakeholder engagement, and automatic asset categorization. 
GRI
GRI is a globally applicable guidance framework that provides standards (the GRI standards) which details approaches to materiality, management reporting and disclosure for a comprehensive range of sustainability issues.  Many organizations are guided by GRI standards in the production of their own sustainability and ESG reports. The three universal standards are used by every organization that reports under the GRI framework. An organization also chooses from the topic-specific standards to report on its material topics – economic, environmental or social. GRI Standards aim to meet the information needs of all stakeholders, and the modular structure supports both comprehensive reports and selected disclosures. Additional paid-for GRI services are available such as help with report production and mapping to the SDGs. 
ILPA ESG Data Conversion Project
This framework is aimed towards private equity industry stakeholders working together to gather better, decision-useful ESG data in order to generate deeper insight into ESG factors and their relationship to financial outcomes, and, ultimately, to drive greater performance on critical ESG issues. The aim is to allow General Partners (GPs) and portfolio companies to benchmark their current position and accelerate progress toward ESG improvements, which the group believes drives better financial outcomes. This will also enable greater transparency and provide more comparable portfolio information for Limited Partners (LPs). The six metrics are: Scope 1 and 2 greenhouse gas emissions (not scope 3), renewable energy, board diversity, work-related injuries, net new hires, and employee engagement. 
Moodys
Moody’s ESG Solutions Group is a business unit of Moody’s Corporation. This group aims to provide ESG scores, analytics, sustainability ratings and sustainable finance reviewer/certifier services. Moody’s ESG Score Predictor provides ESG and carbon emissions footprint estimates, as well as transition and physical risk management scores, for any size company by combining the scoring methodology and data from their ESG Assessment universe with environmental and socioeconomic measures. The ESG Score Predictor leverages 56 ESG scores and subscores for any given company using location, sector, and size. Only companies in the database can be assessed.
PRI
In 2006, the United Nations launched the Principles for Responsible Investment to help investors incorporate ESG factors into their investment and ownership decisions. The international network of investor signatories has grown from 100 to over 2,300, representing over $80 trillion in assets under management. The six principles are a set of voluntary investment principles, supported by 35 possible actions that investors can use to integrate ESG into investment practice. The PRI has specifically aligned its work with the UN SDGs and also made TCFD-based reporting mandatory for its signatories in 2020. The 6 principles incorporate ESG issues into investment analysis, decision-making, ownership policies and practices; seek ESG disclosures in the entities invested in; promote acceptance, implementation and effectiveness of the Principles in the investment industry and report on progress towards implementing the Principles.
SASB
The Sustainability Accounting Standards Board (SASB) is a non-profit organization that has developed a standard for identifying, managing and communicating financially-material sustainability information to investors.These standards are explained through a materiality map and contain a complete set of 77 industry-specific metrics. SASB communicates the sustainability value companies create in investor language. SASB can be used in conjunction with other frameworks. Many companies use SASB along with GRI, for example. Recently, SASB and the International Integrated Reporting Council (IIRC) have officially merged to form the Value Reporting Foundation (VRF).
Sustainable Development Goals (SDG)
The SDGs were conceived by the United Nations in 2015 as a set of political ambitions to achieve the 2030 Agenda for Sustainable Development. The SDGs provide a blueprint for countries to achieve a more sustainable future, including ending poverty and hunger, improving health and education, combating climate change and protecting oceans and forests. While the SDGs were created for UN member states, the UN Global Compact and GRI have joined forces to help businesses report on the SDGs. There are 17 goals, 169 targets and 231 unique indicators. The SDGs have been described as a network of targets that are difficult to directly align with company objectives, strategy and responsibilities. Company claims to contribute to the SDGs are more likely to be on the basis of judgement rather than a verifiable measurement.
TCFD
The Task Force on Climate-Related Financial Disclosures (TCFD) was created to improve and increase reporting of climate-related financial risks for financial market participants. It was set up in 2015 by the Financial Stability Board (FSB) of the G20 to develop voluntary guidelines for companies, banks and investors to use when disclosing climate-related financial risks and opportunities to their stakeholders. The recommendations, issued in 2017, aim to help financial market participants including lenders, insurers and investors, better assess and price risks and opportunities. Voluntary at first, TCFD-based reporting became mandatory in 2020 for all asset owners and managers who are signatories to the UN Principles for Responsible Investment (PRI).  
VentureESG
VentureESG aims to equip VCs to build ESG into their due diligence and portfolio management processes. The framework is made up of 79 questions and 13 metrics to create a “universe of issues to promote engagement, education & learning and training” around ESG issues in VCs and their portfolio companies. To capture current trends around ESG adoption in the industry, VentureESG undertook a survey of VC firms in the respective communities to articulate how ESG performance is most likely to materially impact future financial performance and value creation. 
WEF
The World Economic Forum’s (WEF) International Business Council, PwC and other services firms collaborated with the Climate Disclosure Standards Board (CDSB), Global Reporting Initiative (GRI), International Integrated reporting Council (IIRC) and Sustainability Accounting Standards Board (SASB) to work towards identifying universal metrics for “long-term value creation” to enable more consistent and comparable reporting for their stakeholders, including investors. The resulting framework published in September 2020 is a non–mandatory set of recommendations containing 21 core metrics (well-established standards) and 34 expanded metrics (wider scope/ impact) across 4 pillars: people, planet, prosperity and governance.