The ESG Ratings are scores given to companies or financial instruments on the basis of meeting ESG criteria. The current big challenge that companies are facing is the quality and comparability of ESG ratings.
The ESG scores are becoming critically important in guiding investment portfolios. While substantial work has been put into designing clear ESG standards that would function similarly to accounting standards, comparatively little has been considered with respect to how market participants that rate investment products for ESG qualities – so-called ESG rating providers – can or should be regulated. This question is critically important for the ESG marketplace, as the scores given by ESG rating providers often give investors the trust needed to make a sustainable investment.
As highlighted in ESMA’s correspondence to the EC in January 2021, recent legislative initiatives in the EU have increased financial market participants’ needs for information on entities’ sustainability characteristics. ESG ratings are just one example of a product that is suited to providing this type of information.
Know more about ESMA’s letter.
ESG scores are an important tool for EDP to the extent that they allow the company’s sustainability performance to be measured and make a contribution to the continuous improvement of its operations, particularly in terms of its market orientation.
EDP obtained the following scores:
Results of the sustainability assessment (1)
In the last few years, several ESG rating providers have published ESG ratings on their websites without any paywall. S&P Global, MSCI and Sustainalytics are some examples of those practices.
EDP is recognized as the most sustainable electric utility in the world by S&P Global CSA 1
This pathway started in 2003 when the company talked about the triple bottom line, i.e., environment, society, and economy, the three pillars of sustainable development. EDP’s board recognized this year as the “year zero” of the commitment towards sustainability. Since then, EDP has defined several sustainability strategies that have pushed the company to the path of change and a transition to a more sustainable business model recognized by several ESG rating providers, such as S&P. They recognized EDP as a company with capacity to proper in a competitive world and adapt the business model to anticipating and managing current and future environmental, social, and governance & economic (ESG) opportunities and risks. They also identified EDP as a company that is focusing on quality, innovation, and productivity to create competitive advantage and long-term value.
EDP has strengthened its leadership position by achieving the highest performance in the S&P Global ESG Scores 2023 in a list of 257 companies worldwide. With a score of 88 points (as of November 24th), EDP stands out as the most sustainable electricity company globally, a position it has held for the third time in the last ten years. This result allows EDP to be part of the eligible universe in Dow Jones Sustainability Indices (DJSI) and to be included for the 16th consecutive year in the DJSI World, and in DJSI Europe for the 14th year. Check here for details about S&P Global ESG Scores and here for details about DJSI Annual Review 2023.
EDP has once again been recognized globally for its outstanding sustainability practices, receiving a score well above the electric utilities sector average of 34 points. Out of the 26 criteria analyzed until November this year, EDP scored 100 points ("Best in Class") in four of them: climate strategy, innovation management, market opportunities, and business ethics.
1 Score date: November 24, 2023
By December 16, 2022, EDP scored 90 points in the 2022 S&P Global Corporate Sustainability Assessment, the second-best score in the last 15 years: #1 among integrated utilities and #3 in overall utilities. For more details go to S&P Global site.
In a set of 27 criteria, EDP had the best practice in 8 criteria, obtaining the highest score (100 points) in all of them: Market Opportunities; Water Related Risks; Innovation Management; Materiality; Policy Influence; Environmental Reporting; Social Reporting; Corporate Citizenship/Philanthropy.
The 3 criteria with the best improvements are: Innovation Management, Transmission & Distribution and Occupational H&S and the 2 criteria with worse performance are: Electricity Generation and Operational Eco-efficiency.
On December 9, EDP is selected for being one of the constituents of the DJSI World and Europe. More details go to S&P Global site.
This announcement corresponds to be seen among its peers as a leader company on the assessment of the ESG aspects under the Corporate Sustainability Assessment.
It is the way EDP shows to the investors and other stakeholders how it has pursued a strategy as a leader in the energy transition and has shaped the company until 2030 to be carbon neutral, in which 100% of the production generated by EDP will be renewable.
Com a melhor classificação de sempre, a EDP destacou-se entre 103 utilities elétricas avaliadas. É também a única empresa portuguesa a integrar este índice de referência global na área de sustentabilidade há 14 anos consecutivos.
Com uma classificação final de 91 pontos (em 100), mais três face ao último ano, a EDP consegue assim a melhor avaliação de sempre desde que começou, em 2004, a responder ao questionário para se candidatar aos índices – uma avaliação que já subiu 42 pontos desde então. Além do DJSI World, a EDP também integra o DJSI Europe há 12 anos.
Entre as dimensões de sustentabilidade (ESG) que mais contribuíram para esta boa performance destacam-se as de Governance & Económica (com mais sete pontos) e a Social (mais quatro pontos). Na avaliação das utilities, a EDP integrou o ‘top2’ na dimensão ambiental, o ‘top 3’ na área de Governance e Económica e o ´top 4’ na dimensão social. E, entre os 27 critérios avaliados, há oito em que a EDP obteve a pontuação máxima este ano, obtendo assim a distinção de “Best in Class”: gestão de risco e de crise; materialidade; reporte ambiental; reporte social; influência em políticas públicas; cidadania; riscos relacionados com água e oportunidades de mercado.
The Dow Jones Sustainability Index (DJSI) has once again recognized EDP as one of the global companies with the best sustainability practices. In addition to being the only Portuguese company to be included in this benchmark index for 13 consecutive years, EDP obtained a final score of 88 points (out of 100), which places it among the two best integrated utilities in the world.
EDP was also distinguished as 'Best in Class' in ten of the 27 criteria – one more compared to the previous year – thus confirming its good practices in areas as diverse as climate action strategy, water resources risk management, environmental reports and social, supply chain management, citizenship, stakeholder engagement or human rights.
We are number 1 in the world on the Dow Jones index with the best score ever With a total of 90 points, EDP guaranteed the best score ever and is number 1 among utilities included in the Dow Jones Sustainability Index.
It is the only Portuguese company to be included in the index for 12 consecutive years For us, sustainability is the basis for all our activity, for the 12th consecutive year, we are part of the Dow Jones Index.
This is the clear acknowledgment of EDP's commitment to sustainable development and its ability to execute in different areas of sustainability. Among the criteria adopted, 9 in which EDP achieved the maximum score (100 points) stand out: water risk management, climate change, environmental reporting, social reporting, human rights, community development, involvement with stakeholders, responsible political participation and materiality analysis.
Dow Jones Sustainability Index
Sustainability Indexes are an important tool for EDP because they allow the quantification of the company’s sustainability performance, they contribute to the continuous improvement of operations and they orient the business in terms of market trends and challenges.
This index evaluates, in a very selective and demanding way, the sustainability performance of companies and their adaptation to market trends.
EDP scored 85 points. It is lower than the score obtained in 2017 by 4 points, and higher than the industry average by 39 points. EDP excelled once again in the social dimension, with the industry's best score (89 points).
As for the integrated utilities universe, EDP has dropped from first to second. Regarding the electrical industry global ranking, the company has dropped 2 positions, from second to fourth.
Some of the criteria that have contributed to the electrical utilities ranking drop were: Customer Relationship Management and Operational Eco-Efficiency.
EDP stands out for being the best and for achieving the maximum score (100) in the following seven criteria: Materiality; Policy Influence; Environmental Reporting; Environmental Policy/Management System; Water-Related Risks; Corporate Citizenship/Philanthropy; and Stakeholder Engagement. It also stands out as the best company - although without the maximum score (100) - in the following criteria: Risk & Crisis Management, Talent Attraction & Retention, and Human Rights.
In 2017, EDP achieved a score of 91 (more 2 points than in 2016), 41 points above the average score of electric utilities. Thus, maintaining its position in the World Index for the 10th consecutive year and was selected by RobecoSAM to be part of DJSI Europe, where mark position for 8 years.
EDP, significantly improved the score in the environmental dimension by 9 points (in 2017 scores 91 points). The average score of electric utilities is 46 points. In the remaining dimensions the score was:
- economic; 89 (-3 comparing to 2016) - the average score of electric utilities was 51.
- social: 94 (-2 comparing to 2016) - the average score of electric utilities was 53.
This year, 2,086 listed companies were analyzed. 320 were included in the global index and 149 in the Europe index.
In 2016, EDP increased its score to 89 (against 83 in 2015), maintaining its position in the World Index for the 9th consecutive year. This year, 1,986 companies from the S & P Global BMI stock exchange were analyzed and less than 16% were included in the global index.
EDP was included for the 8th consecutive year in the Dow Jones World Sustainability Index.
In 2015, 3,375 companies from the S&P Global BMI stock exchange were invited for analysis and less than 10% were included in the final index.
In 2014, EDP was included for the 7th consecutive year in the Dow Jones Sustainability Index (DJSI) with 88 points, being considered the leading corporation in the Utilities Industry Group: Electricity, Water and Gas.
In the economic dimension with 89 points, EDP holds the top score (100 points) in the criteria Price Risk Management, Risk & Crisis Management and Scorecards / Measurement Systems.
In the environmental dimension, apart from Biodiversity, a criterion in which EDP attained the highest score, the Water Related Risks criterion achieved significant improvement, attaining 100 points.
The company maintained its score in the social dimension, as well as in leadership of the Human Capital Development criterion.
EDP is a Utilities world leader in the Dow Jones Sustainability indexes (DJSI). For the 6th consecutive year it is included in the DJSI World and Europe sustainability indexes.
In 2013, EDP is leader of Utilities: Electricity, Water and Gas, with the highest score for this index so far: 90 points.
In the Economic Dimension, EDP earned 91 points, one point below the leader. It obtained the best score (100) in the criteria for Price Risk Mangement, Risk & Crisis Management </i>and<i> Scorecards/Measurement Systems.
In the Environmental Dimension, it obtained the highest industry score (89 points) with the top score (100) for Biodiversity.
In the Social Dimension, with 90 points, it leads the industry with respect to Human Capital Development (100).
EDP at the top of global sustainability
For the 5th consecutive year, the Group ranks among the electricity companies with the best performance in the Dow Jones Sustainability Indexes.
In 2012, EDP holds a high-performing position in the Dow Jones Sustainability Index, at both world and European levels, so appearing among the most sustainable power companies. In a world in which the average evaluation in 2012 was 61 points, the company achieved the highest rating ever with 87 points, equaling the leader of the electrical sector and of the supersector of utilities.
In areas such as integrated risk management; management control systems; biodiversity; the development of human capital; engagement with stakeholders and involvement with society in terms of corporate citizenship, it obtained a score of 100.
For the second consecutive year, EDP is world leader in the Dow Jones Sustainability Index in the Electricity Companies Sector.
For the fourth year, EDP is present in the Dow Jones Sustainability World Index (DJSI World) and the Dow Jones Sustainability Europe Index (DJSI Europe), maintaining its position for the second consecutive year as a global leader in the Electricity Sector.
This year, the company achieved a rating of 86 points, increasing its rating by 2 points with respect to 2010 and being a world leader in the Social Dimension.
In the Economic Dimension, EDP continues to be one of the best companies in the sector.
The maintenance of the maximum score in the Risk & Management criterion deserves emphasis.
The improvement of our position in the Environmental Dimension corresponds to the improved alignment with best practices and is the result of efforts that have been developed, both in the area of the biodiversity and environmental management, as well as in the strategy with regards to climate change. The maximum score on Biodiversity and Climate Change should be highlighted.
Of a set of 22 criteria, EDP obtained best practice for 10 of these and reached the maximum score of 6.
EDP is a world leader in the Dow Jones Indexes of Sustainability among companies in the Electricity Sector. For the third year in a row, EDP is included in the Dow Jones Sustainability World Index and the European Dow Jones Europe Index.
EDP is the first Portuguese company to be a world leader in the Dow Jones Sustainability Indexes. The company maintained a prominent position in the leadership of Sustainable Development practices and is, for the first time, Best in Class in the Social Dimension.
It retains its leading position in the Social Dimension, for the first time being considered as Best in Class, reaching 89 points (4 more points than in 2009). It stands out in maintaining the maximum score in the criteria of Human Capital Development, Stakeholder Engagement and Social Reporting, and, for the first time, Best in Classwithout the maximum score in the criterion of Labor Practice Indicator.
In the Economic Dimension, EDP continues to be one of the best companies in the sector, maintaining its 2009 score (88 points), and winning Best in Class with the highest score (100) in the Price Risk Management Scorecards and Measurement Systems and Risk & Crisis Management criteria.
In the Environmental Dimension, its score of 77 points (3 points more than the previous year), EDP shows improvement in alignment with Sector practices as a result of efforts in the areas of environmental management, mainly regarding biodiversity and climate change strategy. The maximum score in the Biodiversity and Climate Strategy criteria and the best score in the Electricity Generation criterion all stand out.
In short, of a set of 22 criteria, EDP is Best in Class in 10, also achieving the maximum score in 8 of these.
In 2009, EDP was selected for the second consecutive year for inclusion in the World and STOXX Dow Jones Sustainability Indexes and so became one of the top 13 companies in the electricity sector in the world and one of the 7 best companies at the European level.
EDP substantially improved its score, with an increase of about 9% compared to 2008 and reduced its distance from the new leader in the global sector, which leads it by only 2 points. EDP reached 100% in 6 of the 21 criteria evaluated: Risk Management, Price Risk Control, Score Card Systems, Stakeholder Engagement, Development of Human Capital and Environmental Reporting. EDP was still considered the best company in Biodiversity (98%) and Electricity Production (92%). The best practices are evaluated based on 21 criteria, divided into economic, environmental and social dimensions, and use either information provided by the applicant company or publicly available information.
The inclusion of a company in these indexes brings it many benefits, both of a tangible and intangible nature. In addition to a public recognition of leadership in strategic areas of economic, environmental, and social dimensions, there is also the important recognition by those who are using ESG data, like asset owners, asset managers, regulators, and banks.
In general terms, it gives us brand reputation, contributes to reinforcing employee relations, retains talent and improves our stakeholder relations. In particular, the effort of entering the Dow Jones Sustainability Indexes also allows the design of clear and precise objectives in terms of sustainable operations.
The constant evaluation of the company and the updating of the criteria creates undeniable rigor in all areas of operations for the Group.
The company’s practices, assessed for inclusion in indexes, include such areas as:
- Value Creation (creating value for the Shareholder, increase in productivity and efficiency; commitment to focusing on the Client);
- Efficient use of resources;
- Environmental and Biodiversity Protection;
- Integrity;
- Dialogue with stakeholders (open and transparent relationships with clients, investors, suppliers, and employees; credible reporting on the company’s performance in all areas);
- Human Capital Management (implementing systems to ensure the health, safety and welfare of employees, the promotion of the development of capabilities, and the rejection of abusive and discriminatory practices);
- Promoting access to energy;
- Support for Social Development.
S&P Global is the world’s foremost provider of credit ratings, benchmarks and analytics in the global capital and commodity markets. S&P Global divisions are: S&P Global Ratings; S&P Global Market Intelligence; S&P Global Platts; S&P Dow Jones Indices. More details here.
S&P Global is responsible for the identification of companies that lead compared to their peers in terms of sustainability performance and financial performance.
S&P Global has developed a proprietary system and a unique methodology to assess the sustainability performance of companies using primary information: the Corporate Sustainability Assessment.
This sustainability analysis is based on a consistent rule-based methodology. The methodology used is mainly primary research (direct contact to companies), but also continuous monitoring of companies regarding critical or controversial issues.
This information provides the sustainability selection universe for the Dow Jones Sustainability Indices and the data for other S&P ESG Indices.
For more details go to S&P Global site.
S&P Global and SAM have had a long-standing successful partnership of over 20 years. In 1999, SAM and S&P Dow Jones Indices collaborated to launch the Dow Jones Sustainability Index.
In January 2020, S&P Global acquired the ESG Ratings and Benchmarking business from SAM, which includes the Corporate Sustainability Assessment (CSA) which forms the basis of company ESG disclosure to S&P Global.
The DJSI allow the creation of portfolios of companies that fulfill certain sustainability criteria better than most of their peers within a given industry.
The DJSI benchmarks are comprised of three geographical breakdowns: DJSI World, DJSI Regions, and DJSI Countries. Indices within these geographical divisions use different starting universes and different percentiles to mark the cutoff point in selecting the most sustainable companies.
Geographical breakdown | Index | Target |
DJSI World | Dow Jones Sustainability World Dow Jones Sustainability World Enlarged Dow Jones Sustainability Emerging Markets | 10% 20% 10% |
DJSI Regions | Dow Jones Sustainability Asia/Pacific Dow Jones Sustainability Europe Dow Jones Sustainability North America |
20% |
DJSI Countries | Dow Jones Sustainability Australia Dow Jones Sustainability Korea Dow Jones Sustainability Korea Capped Dow Jones Sustainability Chile | 30% 30% 25%
|
The Data Providers/Index Providers are one of the main providers of non-financial information. The ESG rating market is very dynamic and these providers of non-financial information increasingly offer a diverse set of products and services to investors (e.g. ESG ratings, sustainability indices, controversy alerts, etc.).
ESG and/or low carbon indices listed in the financial market (1) (or supporting financial indices):
ESG Rating Agencies
(1) EDP may be present in others indices built by the different financial market actors (e.g. ESG indices built by Euronext). The knowledge of these indices does not depend of any initiative from the company.
(2) To find out more, please click here.
(3) Since March 2018.
(4) Use of the exclusion criterium defined by Sustainalytics: Non-Compliance UN Global Compact principles; Involvement in Controversial Weapons (anti-personnel mines, biological and chemical weapons, cluster weapons, depleted uranium, nuclear weapons and white phosphorus); Tobacco Producers (0% revenue threshold); Thermal Coal (>25% revenue threshold from thermal coal mining and exploration; >25% power generating capacity/thermal coal electricity production).
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