On the Mechanics of Sustainability: ESG Rating and Company Performance

ESG is the core concept in the field of green finance that has attracted much attention in recent years. Based on traditional financial indicators, ESG aims to integrate environmental, social, and governance factors. By examining the potential for long-term and sustainable value growth of the company, it can effectively help prevent and control downside risks, obtain long-term returns, and discover economic growth. However, there are currently many international ESG rating systems, lacking a unified framework, transparency of their rating methodologies, data sources, and a consensus on how to evaluate the ESG related risk profiles. This research intends to find how ESG Rating is constructed from company performance. In the study, we mainly did the review and illustration of MSCI & RepRisk ESG Rating. We can identify limited mechanisms that could hinder us to simulate ESG rating under various circumstances. For RepRisk, we could only identify the formula in the last step of generating RepRisk Rating: Scale RRR = 0.5 𑁦 (country sector av+|||||| peak RRI). For MSCI, we could only identify the rating construction methodologies based on various factors. However, we believe that the blockchain is supportive of eliminating these limitations, and we aim to explore the possibility of constructing an ESG rating system for blockchain for our next step.