Industry-Specific Approach to ESG Ratings: Analyzing the Impact on Russian Companies

Abstract

Objective: The objective of this study is to analyze the limitations of current ESG assessment methodologies and propose a more industry-specific approach to accurately assess companies' ESG performance. By examining the importance of various sustainability factors across different industries, the study aims to highlight the need for more tailored ESG assessments. Method: A comprehensive analysis of current ESG assessment methodologies was conducted, along with an examination of the importance of various sustainability factors across different industries. The study used a mixed-methods approach, including both qualitative and quantitative analysis. Results: The study found that the importance of ESG factors varies by industry, and a more industry-specific approach is necessary to accurately assess companies' ESG performance. The findings have practical implications for rating agencies, companies, and investors interested in sustainable development. Based on the analysis, aggregated conclusions are given on the level of significance of various factors of sustainable development for specific industries. However, the lack of published non-financial statements and reports in Russia complicates the process of developing weight coefficients for Russian companies. Conclusions: The study highlights the need for a more industry-specific approach to ESG assessments to accurately assess companies' ESG performance. The findings suggest that it is necessary to develop a methodology of weight assessment for different industries, including a unified system of assessment across different ESG rating providers. The Bank of Russia has published a report in the beginning of 2023 that provides recommendations on developing ESG assessment methodology and scope for the weights for each ESG criteria and elements.