Standard Ethics is an independent sustainability reporting rating agency based in London. As a brand, Standard Ethics has been making a name for itself in the world of Sustainable Finance and ESG studies since 2004. It is renowned as having introduced in 2001 a standardised and uniform approach to sustainability ratings, both from a business model and methodology point of view. From a methodological angle, it separates Corporate Social Responsibility from Sustainability, which, according to the agency, is a global and systemic approach and whose definition is not given by a single entity but by international institutions. In fact, Standard Ethics aims to promote sustainability and corporate governance standard principles issuing the Standard Ethics Rating, an evaluation of the level of compliance of companies and sovereign nations on matters such as corporate governance and sustainability as indicated by documents and guidelines published by the United Nations, the Organisation for Economic Co-operation and Development and the European Union. Using this approach Standard Ethics adopts an ethic neutral approach, as it follows international guidelines. The Standard Ethics Business Model is based on the Applicant-pay model. Like credit rating agencies, Standard Ethics sells solicited ratings, meaning it charges applicants a fee for providing a rating. From the moment it is assigned, the rating belongs to the applicant. Conversely, under the “Investor-pay model”, agencies charge investors a fee for providing a list of investable companies.
Standard Ethics Rating
The Standard Ethics Rating is a Solicited Sustainability Rating. It combines ‘solicited’, ‘standard’, and ‘independent’ characteristics. It is assigned upon a client’s request through a direct and regulated bilateral relationship. It is a rating that intends to deliver an evaluation of the level of compliance by companies and sovereign nations in the field of sustainability and corporate governance as indicated by documents and guidelines published by the United Nations, the Organisation for Economic Co-operation and Development, The European Union. To ensure accuracy and comparability, Standard Ethics does not use weights and KPIs based analyses or indicators, but uses a more sophisticated method based on its own proprietary six-group variable algorithm. Standard Ethics links the rating to an evaluation done both at a qualitative and quantitative level of the potential reputational risks for a company. This process helps in protecting corporate assets, particularly corporate reputation. Companies believe that EU, OECD and UN recommendations suggest future legislative requirements. Therefore, complying with this model could bring a competitive advantage. The methodological approach of Standard Ethics was first introduced in 2001 and its rating are based on a scale comprising 9 letter grades: EEE; EEE-; EE+ ; EE; EE-; E+; E; E-; F ; where "EEE" stands for ‘above average’; "EE" for ‘average’;"E" for ‘below average’. All ratings above the “EE-“ are considered full investment grade and compliant with the indications of international organisations on sustainability and corporate governance. Whenever an entity is downgraded to “F” holding its securities may have a strong negative impact. Those nations and companies which do not comply with the values expressed by the United Nations, OECD and EU, or that do not release enough information, or are facing major changes, do not receive ratings and are included amongst the “pending” issuers. This measurement approach is now used by other ESG operators and has been a pioneer in measuring Corporate Social Responsibility and other ESG factors with a systemic and standardised method. The Agency guarantees both the independence of its evaluations and its customers and it only offers its clients services related to the rating itself. It does not consult third parties. It does not provide consultancy services nor does it use the data collected for asset management activities .
Standard Ethics indices
Standard Ethics covers the major OECD Stock Exchange markets and the largest listed companies in those markets. In April 2019, Standard Ethics announced its SE European 100 Index, whose Index constituents have been selected according to their dimension, in terms of market capitalisation. To date, Standard Ethics has created the following Indices:
SE European 100 Index.
SE Italian Index.
SE Italian Banks Index.
SE UK Index.
SE French Index.
SE German Index.
SE Belgian Index.
SE Spanish Index.
SE Dutch Index.
SE Swiss Index.
SE European Banks Index.
SE Best in Class European Index.
SE US Index.
The way Standard Ethics reports on its indices is based on full disclosure.
National Ratings
This is the situation for sovereign nations with a Standard Ethics Sustainability Rating as of April 2019. In 2013, Standard Ethics was the first to assign the rating to the Vatican City State.
