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Standard Ethics Aei

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Standard Ethics
IndustryRatings
Founded2004
Headquarters
London
,
Belgium, UK and Italy
Key people
Mrs.Blanche Ullens de Schooten (Chairman)
ProductsSolicited Sustainability Ratings
ServicesSustainability Rating
WebsiteStandard Ethics

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 (Environmental, Social and Governance) 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 (CSR) 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. [1] 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 (UN), the Organisation for Economic Co-operation and Development (OECD) and the European Union (EU). 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 (corporate entities) a fee for providing a rating. From the moment it is assigned, the rating (and the analysis) belongs to the applicant. Conversely, under the “Investor-pay model”, agencies charge investors a fee for providing a list of investable companies. [2] [3]


Standard Ethics Rating

The Standard Ethics Rating (SER) is a Solicited Sustainability Rating (SSR). 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 (UN), the Organisation for Economic Co-operation and Development (OECD), The European Union (EU).[4]

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: [5] 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 (CSR) and other ESG factors with a systemic and standardised method.[6]

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 (both free or requiring the payment of a fee).

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. [7]

To date (April 2019), Standard Ethics has created the following Indices:

  • SE European 100 Index (composed of the 100 largest European listed companies based on market capitalisation, with a Standard Ethics Rating).
  • SE Italian Index (40 companies within the FTSE-MIB index of the Italian Stock Exchange that have been assigned a Standard Ethics Rating).
  • SE Italian Banks Index (composed of all Italian banks listed on the Italian Stock Exchange with a Standard Ethics Rating).
  • SE UK Index (composed of the 40 largest British listed companies with a Standard Ethics Rating).
  • SE French Index (composed of the 40 largest French listed companies with a Standard Ethics Rating).
  • SE German Index (composed of the 30 largest German listed companies with a Standard Ethics Rating).
  • SE Belgian Index (composed of the 20 largest Belgium listed companies with a Standard Ethics Rating).
  • SE Spanish Index (composed of the 30 largest Spanish listed companies with a Standard Ethics Rating).
  • SE Dutch Index (composed of the 30 largest Dutch listed companies with a Standard Ethics Rating).
  • SE Swiss Index (composed of the 30 largest Swiss listed companies with a Standard Ethics Rating).
  • SE European Banks Index (composed of the 40 largest European listed banks with a Standard Ethics Rating).
  • SE Best in Class European Index (composed of the 30 European list companies with the highest Standard Ethics Rating).
  • SE US Index (composed of the 20 largest US listed companies with a Standard Ethics Rating).

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.[8]

Country Rating Outlook Date
 Argentina 17E October 2015
 Australia 21EE+ October 2015
 Austria 22EE- March 2020
 Belgium 19EEE- October 2015
 Brazil 19EE- April 2014
 Bulgaria 19EE- April 2014
 Canada 21EEE- March 2018
 Chile 18E+ April 2014
 China 16E- Nov 2018
 Czech Republic 20EE- October 2016
 Denmark 23EEE June 2016
 Egypt 16E- April 2014
 Estonia 19EE- April 2014
 Finland 23EEE- October 2015
 France 22EEE- April 2014
 Germany 21EE+ April 2014
 United Kingdom 22EEE- March 2017
 Greece 20EE January 2015
 Hungary 18E Negative March 2020
 Iceland 23EEE April 2014
 India 17E Under monitoring April 2014
 Ireland 22EEE- April 2014
 Israel 18E+ April 2014
 Italy 21EE+ March 2020
 Japan 20EE April 2014
 Luxembourg 21EE+ October 2015
 Mexico 19EE- April 2014
 Netherlands 22EE+ March 2020
 New Zealand 22EEE- February 2018
 Norway 23EEE October 2015
 Poland 19E March 2020
 Portugal 20EE April 2014
 Romania 19EE- April 2014
 Russia 17E- Under monitoring April 2018
 Slovenia 21EE+ October 2015
 Slovakia 20EE Negative February 2016
 South Africa 19EE- October 2015
 South Korea 18E+ Positive July 2016
 Spain 22EE+ October 2017
 Sweden 23EEE- May 2020
  Switzerland 21EE+ March 2020
 Turkey 18E- Negative September 2017
 USA 22EE Negative Jun 2018
 Vatican City 20EE April 2014

References

  1. ^ "How the World's First Sustainability Ratings Agency Works".
  2. ^ "Fresh blow for RBS as ethics agency gives them an E- rating".
  3. ^ Stachowiczstanusch, Agata; Mangia, Gianluigi; Caldarelli, Adele; Amann, Wolfgang (April 2017). Organizational Social Irresponsibility: Tools and Theoretical Insights. ISBN 9781681237602.
  4. ^ Cash, Daniel (17 December 2018). The Role of Credit Rating Agencies in Responsible Finance. ISBN 9783030037093.
  5. ^ As explained in a scientific publication of 2002: Jacopo Schettini Gherardini, "Introduzione" in "Etica, futuro e finanza", Schettini G. J. e Schettini G. L. (a cura di), Il Sole 24Ore, marzo 2002, Milano, Pag.9
  6. ^ https://web.archive.org/web/20110125062744/http://www.iseing.org/egov/eGOV05/Source%20Files/Papers/CameraReady-14-P.pdf
  7. ^ "Borsa: Quotazioni, azioni e titoli - Il Sole 24 Ore Mercati".
  8. ^ "Vatican City State receives elevated Standard Ethics Rating".
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