Low Carbon Transition Rating
Global Standards Screening
FAQ for Companies
Introduction
Morningstar Sustainalytics’ Global Standards Screening product provides an assessment of a company’s impact on stakeholders and the extent to which a company causes, contributes or is linked to violations of international norms and standards. The basis of the GSS assessments is the United Nations (UN) Global Compact Principles. Information regarding related standards is also provided, including the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, as well as their underlying conventions.
Morningstar Sustainalytics developed Global Standards Screening in order to serve investor clients who wish to implement norms-based screening for their investment portfolio for compliance purposes.
The market expectations of multinational enterprises have been evolving rapidly. In addition to topics that have traditionally been expected of companies as responsible business conduct, we have observed further developments, notably with respect to themes such as taxation, consumer rights, human rights, and free and prior informed consent, for example.
Global Standards Screening provides an assessment of a company’s impact on stakeholders and the extent to which a company causes, contributes or is linked to violations of international norms and standards. The basis of the assessments is the United Nations (UN) Global Compact Principles, and companies are assessed as either Compliant, Watchlist or Non-Compliant in relation to international standards. The companies are not rated, and they do not receive a score.
Controversy Research assesses a negative event caused by a company from the perspectives of both impact on the environment and society and risks to the company’s operations. The Controversy assessments are done with a scale of Category 1 (Low) to 5 (Severe) and updated on an ongoing basis.
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The Global Standards Screening provides an assessment of a company’s impact on stakeholders and the extent to which a company causes, contributes or is linked to violations of international norms and standards.
The basis of the GSS’ assessments are the United Nations (UN) Global Compact Principles. Companies are assessed as Non-Compliant, Watchlist, or Compliant based on the UN Global Compact’s 10 Principles on Human Rights, Labor, the Environment and Business Ethics. Information regarding related standards is also provided, including the Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, as well as their underlying conventions.
International Standards Used within the Global Standards Screening
UN Global Compact Principles (UNGC) | Identifies the specific UNGC Principle(s) to which the case relates. |
UN Guiding Principles on Business and Human Rights (UNGPs) | Relevant Principle(s) of the UNGPs are attached to the Watchlist and Non-Compliant cases. |
| OECD Guidelines for Multinational Enterprises | Relevant Chapter(s) of the OECD Guidelines are attached to the Watchlist and Non-Compliant cases. |
| Related Conventions | Relevant international instruments and conventions are attached to the Watchlist and Non-Compliant cases. |
GSS company assessments reflect several dimensions, including:
- Severity of Impacts on Stakeholders and/or Environment – scale, scope and irremediability.
- Company Responsibility – accountability, exceptionality and systematic nature.
- Company Management – response, management systems and implementation.
A holistic assessment based on all these factors is made to determine whether a company’s operations can be considered compliant with commonly accepted international norms or standards.
Assessment status
Companies are assessed as Non-Compliant, Watchlist, or Compliant based on the UN Global Compact’s 10 Principles on human rights, labor, the environment and business ethics.
Case Assessments
Given that some companies have at the same moment in time more than one distinct case that brings them in conflict with international norms, we clearly separate the case assessments from the overall company assessment, with a status and a short explanatory text both at the case-level and the overall company-level. Every incident or series of related incidents constitute the basis for a case. A company may have several active cases at the same time. Every case is assessed as Compliant, Watchlist or Non-Compliant.
Overall Assessments
The overall company assessment is simply the most severe of all underlying case assessments. While two or more similar incidents a) make the overall impact more severe b) are likely to make us question the company's management of the issue more, there is no automatic rule that would make a company with two (or more) Watchlist issues Non-Compliant.
Outlook
A Positive, Negative or Neutral outlook is provided based on our assessment of whether we expect an improvement or a deterioration in the assessment status.
We monitor 700,000 news items from more than 60,000 media and NGO sources on a daily basis in order to identify potential incidents for a universe of over 20,000 issuers.
Our local language coverage includes over 10 languages:
- English
- French
- Spanish
- Portuguese
- Japanese
- Russian
- Dutch
- Swedish
- Danish
- Norwegian
- Chinese
In addition, our team tracks news, media and NGO sources for new developments and new cases. The analysts also review company disclosure as well as other publicly available information. Furthermore, companies are contacted to determine whether the case requires a possible change of the assessment status and/or an update of the assessment report.
Global Standards Screening is delivered to Morningstar Sustainalytics' investor clients on a quarterly basis.
All companies researched under the Global Standards Screening product are monitored on an ongoing basis for possible incidents that may warrant a review of their status. Sustainalytics has a dedicated team that monitors, on a daily basis, tens of thousands of news items as well as NGO reports for ESG incidents relevant for the Global Standards Screening. For relevant incidents, analysts conduct further fact-finding research, and companies are contacted to determine whether the case requires a possible change of the assessment status and/or an update of the assessment report.
Sustainalytics contacts companies for every status change from Compliant to Watchlist or Non-Compliant, to inform them about the status change. However, Sustainalytics does not solicit feedback on the status or company assessment reports. Companies can, however, provide feedback on our Controversy Rating reports by our Ratings Team, which are important inputs to our Global Standards Screening assessments.
Please email your questions to [email protected]