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As awareness grows around sustainability and social responsibility, the business world is undergoing transformation. Today, investors, regulators, and the public no longer assess companies solely based on financial metrics, but also on how companies manage environmental impacts, treat workers, and practice transparent governance. In this context, ESG rating (Environmental, Social, and Governance) has become a new benchmark for assessing long-term integrity and resilience in business.
ESG rating is an evaluation system used to assess a company’s sustainability performance across three main aspects: Environmental, Social, and Governance. These evaluations are conducted by independent rating agencies, and the final results are usually presented in numerical scores or letter categories, such as AAA to CCC.
ESG ratings offer a picture of the risks and non-financial opportunities that a company holds. Companies with high ESG ratings are often seen as better at managing climate sustainability, social inequality, and governance crises—making them a preferred choice for long-term oriented investors.
The ESG assessment process begins with the collection of data from public company sources, such as annual reports, sustainability reports, financial documents, and survey responses. Some agencies also use third-party data, news articles, or even interviews with company management to gain further insights.
Next is a materiality analysis, which identifies ESG issues that are most relevant to a company's sector or operating region. For example, manufacturing companies are more likely to be rated on energy efficiency and waste, while tech companies might be assessed based on data protection and AI ethics.
After that, the agency evaluates the company’s ESG performance based on pre-determined indicators. This evaluation includes:
Beyond current performance, analysts also consider the company's long-term strategy. For example, are there targets for emission reduction? Does the company have anti-corruption policies or renewable energy initiatives? This approach allows not just descriptive, but also forward-looking assessments.
All of these results are quantified into ESG scores, which are then classified into an easier-to-read rating scale.
Different global agencies use different systems to present ESG rating results:
MSCI ESG Ratings
Uses letter grades from AAA (best) to CCC (worst):
Sustainalytics
Uses a numerical risk score (the lower, the better):
S&P Global and Refinitiv
Use a 0–100 scale, where a higher score indicates stronger ESG practices.
Although the scales differ, all serve the same purpose: helping investors and the public evaluate how well a company manages ESG risks that are material to its business.
In Indonesia, ESG practices are gaining strong support from regulators and capital markets. The Financial Services Authority (OJK) has issued the Indonesia Green Taxonomy, a classification guideline for economic activities that support sustainability. Additionally, the Indonesia Stock Exchange (IDX) has launched the IDX ESG Leaders and IDX ESG Quality 45 indices, which highlight top-performing ESG issuers based on global ratings.
Many companies in Indonesia, especially large public ones, are now being monitored by global rating agencies like MSCI and Sustainalytics. Their performance is assessed based on long-term sustainability strategies that can improve transparency and investor trust.
An ESG rating is more than a label. It is a strategic measurement tool used to:
Companies with high ESG ratings are generally more resilient in times of crisis, demonstrate stronger social relationships, and are more aware of long-term environmental risks.
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