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JP Morgan_Zak Denny_What is an ESG Rating
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An Environmental Social and Governance rating or ESG rating, is a score that's meant to reflect a company's exposure to, and management of ESG risks that can impact performance. So that's going to look very different for each company. Exposure to ESG risks is influenced by the sector and geography in which a company operates. So for example, if you're an oil and gas company, you're likely going to have higher exposure to environmental risks than a tech company might.
How well you manage those ESG risks is influenced by a company's public policies, procedures, and commitments. For example, a company's privacy policy or code of conduct will very likely impact its social score. ESG ratings are really intended to provide a single score updated at least annually and generally comparable across industries that reflects a wide range of ESG topics.
There are a few ways ESG ratings are used. First, investors often use them to determine what companies to invest in, or help them compile an ESG index. Second, businesses may look at them to determine which vendor to use or where to source their raw materials.
ESG ratings are often compared to credit ratings. One key difference is that credit ratings are paid for by the entity being rated whereas for ESG ratings it's a subscriber pay model where the user of the rating pays and the entity being rated will get a rating whether they want one or not. Another important difference, is credit rating agencies are highly regulated whereas regulation for ESG ratings is only just beginning to be considered.
ESG ratings are non-standardized and each rater will have its own methodology. Some focus more on ESG risk while others focus more on ESG impact. A few key differences between raters could be what ESG factors they consider? How they assess those ESG factors?And how they weight those ESG factors?
It's really important to engage with ESG raters to better understand their methodology and to communicate to them everything that your firm is doing in the ESG space. Another tip is to speak with customers, suppliers, and investors to understand whether they're using ESG ratings, and if so, how? That can really inform your ESG rating strategy.[MUSIC PLAYING]
Payments
J.P. Morgan at NACHA Smarter Faster Payments 2024
Apr 22, 2024
Every payment is an opportunity for growth, optimization and innovation. Join us for NACHA Smarter Faster Payments 2024 where we will speak in a number of sessions around several key topics including fraud mitigation, the power of AI and data in payments and more.
Payments
Unlock customer insights—your key to business growth
Apr 19, 2024
Having better data means making better business decisions. See how our Customer Insights solution can help give you the customized data insights you need quickly and easily.
Payments
J.P. Morgan Payments launches new System Integrator Program
Apr 09, 2024
New program for professional service companies aims to help joint clients advance payments strategy and implementation.
Payments
Kyriba expands its TMS offering with JPM Coin and Global Payments API
Apr 08, 2024
For the first time, Kyriba clients can operate Blockchain Deposit Accounts (BDAs) within their existing Treasury Management Systems (TMS), allowing treasurers to manage cashflow and send payments with the speed of blockchain.
Payments
Streamline your payments with the help of Prepaid Card
Apr 01, 2024
Simple. Cost effective. Digital or physical. Give your business a choice in your overall payment program—and give your customers, clients, and employees the flexibility they want—with Prepaid Card by J.P. Morgan Payments.
Payments
Understanding purchasing cards
Mar 28, 2024
Typically used for B2B purchases, purchasing cards can provide enhanced visibility, control, fraud protection and other benefits.
Payments
“Trends in Healthcare Payments” annual report
Mar 26, 2024
Every year, J.P. Morgan Healthcare Payments releases this data-driven report to highlight the latest payments trends impacting the healthcare industry.
Payments
Understanding virtual credit cards
Mar 22, 2024
Virtual cards are an efficient and secure way to issue payments—without the need for a plastic card.
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