ESG Ratings
As consumer demand for clean energy grows, demonstrating sustainability fosters customer loyalty and strengthens our green focused positioning.
Presenting sustainable performance is vital for regulatory compliance, attracting green investments, and building a positive reputation. It aligns the company with environmental laws and helps secure financing from ESG-focused investors.
ESG Ratings are assessments given to companies or financial instruments based on their adherence to ESG criteria. The current major challenge faced by companies is the quality and comparability of these ratings. ESG ratings have gained increasing influence in global capital markets, as investors, borrowers, and issuers rely on them to make well-informed, sustainable investment and financing decisions.
ESG ratings are used as inputs for EUR 3,787 billion (i.e 48% of total assets under management), according to ESMA ESMA Call for evidence on market characteristics of ESG Rating, June 2022.
The Proposal for a regulation of the European Parliament and the Council on the transparency and integrity of Environmental, Social and Governance (ESG) rating activities aims to enhance the reliability and comparability of ESG ratings by introducing a common regulatory approach to improve the transparency and integrity of ESG ratings providers' operations and prevent potential conflicts of interest.
Some aspects of the new ESG rating regulation: a) Under the new regulation European Securities and Markets Authority (ESMA) will be responsible for developing the secondary legislation/ Regulatory Technical Standards (RTS) which will further clarify the responsibilities of authorised ESG Ratings providers under the new regime; b) Providers must publish on their website the methodologies, models and key rating assumptions they use in their ESG rating activities.
ESG scores are an essential tool for EDP, facilitating the measurement of the company’s ESG risk, ESG performance and long-term ESG value creation, contributing to the continuous improvement of its operations, and fostering trust and confidence among investors and other stakeholders. We follow the ESG rating providers which allow us to disclose the ESG ratings/scores on the table below.
Results of the sustainability assessment (1)
| ESG Rating Providers | Scale | Score | Ranking | Publication of results |
|---|---|---|---|---|
| S&P Global Corporate Sustainability Assessment | 0-100 | 86 | 2nd position in electric utilities | 18th November 2024 |
| CDP Climate Change | "D-" to "A" | A List | n.a. | January 2024 |
| CDP Water Security | "D-" to "A" | A- List | n.a. | January 2024 |
| Sustainalytics | 100-0 | 18.2 (low risk) | n.a. | June 2024 |
| MSCI (M SCI ESG) | CCC - AAA | AAA | Top 11% | November 2024 |
| ISS ESG Ratings (QS - Quality Score) | 10-1 | E&S:! | G:2 | n.a. | September 2024 | July 2024 |
(1) The ratings are independent and, as such, there should be no comparison.
n.a. - not applicable.
In the last few years, several ESG rating providers have published ESG ratings on their websites without any paywall. S&P Global, MSCI, Sustainalytics and CDP are some examples of those practices.
Peer ESG rating overview
| ESG Ratings | EDP | Terna | Iberdrola | Enel | Örsted |
|---|---|---|---|---|---|
| S&P Global | 86 | 83 | 85 | 83 | 58 |
| MSCI | AAA | AA | AAA | AAA | AAA |
| MSCI Temperature Rise | 1.3ºC | 1.4ºC | 1.3ºC | 1.3ºC | 1.4ºC |
| Sustainalytics | 18.2 | 7.9 | 16.3 | 18.8 | 15.6 |
| CDP Climate Change The A List | A | - | A | A- | A |
Check also the information for non-ESG rating agencies
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.
Our top-scoring criteria (in points)
Content card grid
Out of 27 criteria, EDP excelled in 8, scoring 100 points each: Market Opportunities, Water Related Risks, Innovation Management, Materiality, Policy Influence, Environmental Reporting, Social Reporting, and Corporate Citizenship/Philanthropy. The most improved criteria are Innovation Management, Transmission & Distribution, and Occupational H&S; the least improved are Electricity Generation and Operational Eco-efficiency.
On December 9, EDP was selected for the DJSI World and Europe indices. This highlights EDP's leadership in ESG aspects.
The strongest ESG areas were Governance & Economic (+7 points) and Social (+4 points). EDP ranked in the top 2 for environment, top 3 for governance & economic, and top 4 for social. In 8 out of 27 criteria, EDP achieved the maximum score, being “Best in Class.”
This index rigorously evaluates companies' sustainability performance and market trend adaptation. EDP scored 85 points, 4 points lower than in 2017, yet 39 points above the industry average. EDP excelled in the social dimension with the industry's highest score of 89 points.
In the integrated utilities category, EDP dropped from first to second, and in the global electrical industry ranking, from second to fourth. Contributing to this drop were criteria like Customer Relationship Management and Operational Eco-Efficiency.
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.
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.).
Please, check below the ESG and/or low carbon indices listed in the financial market (1) (or supporting financial indices).
ESG Rating Agencies
| Data Providers | Reference stock index | Indices | EDP is member | Interaction with assessed companies/ Information collection |
|---|---|---|---|---|
| S&P Global Corporate Sustainability Assessment | S&P Global BMI | Dow Jones Sustainability Indices | DJSI World and DJSI Europe | Questionnaire filled by the assessed companies |
| S&P Global (2) | S&P Global BMI | S&P Clean Energy Index | Yes | Trucost's annual research process |
| ISS ESG Ratings | Information collected from public sources through an ongoing process | |||
| ECPI | ECPI Global Ethical Equity and/or Initial Eligible Universe | ECPI Indices | ECPI Indices | Public information collected by data providers, such as Bloomberg, Datastream and Reuters |
| MSCI (MSCI ESG) | MSCI World Index. MSCI Global Investable Market Indexes (GIMI) | MSCI ESG Leaders Index | MSCI ACWI ESG Leaders Index | MSCI World ESG Leaders Index |
| Sustainalytics | STOXX ESG Leaders Indices | STOXX Global ESG Leaders Index | STOXX Social Leaders Index | |
| CDP Climate Change | n.a. | EDP in not an "A Listers" member in terms of performance | Questionnaire filled by the assessed companies | |
| CDP Water Security | n.a. | EDP is not an "A Listers" member in terms of performance | Questionnaire filled by the assessed companies |
(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.