Accurate ESG information for a better risk exposure assessment
In 2022 the EU is expected to pass new legislation mandating companies to perform supply chain due diligence on the environmental and human rights (EHR) risks in their supply chains in line with the United Nations Guiding Principles on Business and Human Rights (UNGP). Levin Sources has developed The ESG Materials Score, an innovative, data-driven summary of the ESG performance of a material’s value chain which helps users to comply with their EHR due diligence obligations.
Using 6 major risk categories, 14 issue and 105 sub-issue categories, The ESG Materials Score helps companies to allocate resources efficaciously to focus on the higher priority risks, metals, geographies and tiers in their supply chains by offering clarity on ESG risks at every stage of the value chain. The product is initially available for 16 materials critical to the green economy, with more to be added regularly.
The exclusive methodology helps focus users on the most salient risks, based on their higher probability of materialising (likelihood) and the extent of the negative impacts (severity) if they do materialise. Ultimately it will make risk management less costly and more effective and reduce incident rates and impacts on stakeholders including vulnerable groups.
How is this different from other ESG scores?
The ESG Materials Score ensures a company focuses on the right set of risks so money and time aren’t wasted, and gaps don’t become surprise scandals because they understand better the salience of their ESG risks in all parts of the value chain. By shifting attention from an individual company to an individual material, companies know what questions to ask of their suppliers or investees. Clients get more accurate information on their ESG risks and so can assess their potential risk exposure with greater precision.
How The ESG Materials Score is used by our clients
Investors use our ESG Materials Score to help profile the risk exposure of their investments as it provides insight into an investee’s exposure to specific issues. It also equips investors with the relevant knowledge to ask companies how they are managing the risks that are more likely to occur and that could have a severe impact if they materialise. This data helps investors manage the risks in their portfolio to ensure long term performance. It also motivates investees to take action on these risks and communicate better on their management.
Banks use our ESG Materials Score as part of their sustainable investment pledges and in the development of new sustainable banking and investment products and services, such as carbon neutral banking, green home-improvement loans, and sustainable exchange traded funds (ETFs). They become more fully informed on the risks linked to their services when a client operates in materials extraction and transformation along the value chain.
Companies at any stage of the supply chain use our ESG Materials Score to identify and assess the most severe risks in a material’s value chain, including where they may have very limited visibility. Risk management improves, incidents reduce, and liabilities can be avoided.