Proprietary Responsible Investment Ratings | Columbia Threadneedle Investments

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As an active manager, it’s our duty to consider all factors that can pose a risk to or enhance client assets. We have added to our extensive fundamental research effort by launching an innovative responsible investment (RI) ratings system that combines an assessment of a company’s financial stewardship with a view on how well it manages its Environmental, Social and Governance (ESG) risks.

By combining both aspects into a single, forward-looking company rating from 1 (the strongest) to 5 (the weakest), this proprietary tool reflects our conviction that prudent management of financial and ESG factors is important to a company’s ability to create long-term, sustainable value.

Utilising data science and cloud computing, the RI ratings provide our global investment teams with a more robust responsible investment framework and enhanced analysis of over 5,500 listed equities across the world, to complement existing fundamental analysis.

How do RI ratings work?

The ratings combine two proprietary models, one focused on financial stewardship and the other on performance on ESG materiality factors. The outputs of the models are combined to produce a responsible investment rating from 1 to 5.

The financial stewardship model draws on academic models that measure prudent, long-term financial governance to identify well-managed businesses. It then applies a proprietary company stewardship rating, which complements the fundamental and risk perspectives of our investment teams.

The ESG materiality model builds on the Sustainability and Accounting Standards Board (SASB®) framework, which identifies the most financially material sustainability factors for 77 distinct industries. It provides insight into management focus and operating practice standards, supporting fundamental analysis.

Our culture of collaboration underpins the research ecosystem and ensures insights are discussed, debated and shared throughout the firm.

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Insights

Our proprietary responsible investment ratings is an innovative tool that combines ESG and financial stewardship data to create a single company rating for 5,500 listed equities globally. So how do our PMs use it?