ESG, or Environmental, Social, and Governance, ratings have become an increasingly popular way for investors to evaluate companies’ sustainability and ethical practices. As more and more investors seek to align their investments with their values, ESG ratings have become a valuable tool for assessing a company's impact on the environment, its treatment of employees and other stakeholders, and the quality of its corporate governance.
In this blog, we will explore what ESG scores are, how they originated, the growing importance of ESG ratings in today’s business landscape, and how TelmarHelixa can help you measure the ESG impact of your media plans.
What is an ESG score or rating?
ESG (Environmental, Social, Governance) scoring is used to evaluate a company, fund, or securities performance and management practices as they relate to the Environment, Social, and Governance policies.
Environmental factors evaluate a company’s involvement and contribution to the natural environment, including sustainability policies, limiting pollution, and protection of fauna and flora.
Social factors include intra and inter company relations ranging from gender equality, diversity and employee rights, community relations, NPOs and supply chain labor standards.
Governance factors evaluate corporate governance policies and procedures ranging from good accounting practices, business ethics, board structure, executive compensation, ethics, and compliance.
What is their origin?
The concept of ESG ratings originated in 2004 , when the then former UN Secretary General, Kofi Anan, extended an invitation to over 50 CEOs of major financial institutions, to take part in a collaborative initiative under the guidance of the UN Global Compact. The objective of this partnership was to find ways to incorporate ESG focused strategies into capital markets. These collaborative partnerships resulted in two reports namely, ‘Who Care Wins’ and the ‘Freshfield Report’.
The Principles for Responsible Investment (PRI) were built on the foundation of these two reports, which maintained that incorporating Environmental, Social and Governance factors into capital markets was not only sound business practice, but also promotes sustainability and positive social outcomes.
Today the PRI has over 1,600 members that represent more than $70 trillion Assets Under Management (AUM) and continues to promote the incorporation of ESG into analysis and financial decision-making.
Why do they matter?
By 2025, ESG assets worldwide are expected to surpass $53 trillion, accounting for over one-third of the estimated total Assets Under Management of $140.5 trillion.
As ESG focused businesses continue to outperform non-ESG ones, more and more investors are recognizing the financial benefits of investing in companies that prioritize ESG factors.
Here are three reasons why companies should pay attention:
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- ESG scores help companies manage risk: If not managed properly, they may face negative consequences such as reputational damage, supply chain disruption, and loss of investor confidence.
- They help attract investment: Investors are increasingly considering ESG factors when making investment decisions leading to a better chance of raising capital.
- They help companies and businesses build brand value. The ‘new’ conscious consumers are increasingly looking for products and services that align with their values and beliefs. They choose to buy environmentally friendly, fair trade, and cruelty free products and avoid purchasing products that contribute to social or environmental harm.
Agencies that are able to provide a comprehensive evaluation of a brand's media investment, in terms of ESG factors, offer a significant advantage to brands. Additionally, this approach can help agencies stand out in the RFP process by showcasing their dedication to quantifying the CMO’s marketing investment through an ESG lens.
How we can help
Marketing investment is a major factor of a brand’s supply chain and provides an opportunity for brands to prioritize and communicate their commitment to ESG through their media investment. This will help build brand value, create a competitive advantage, manage risk, and attract and retain investors.Ultimately, with the rise of conscious consumerism and the drive to demonstrate purpose-driven marketing, consumers are increasingly looking for products and services that align with their values. By establishing a strong ESG performance, a company can position itself as a leader in sustainability, which helps attract customers and build advocacy.Given this context, incorporating an ESG strategy into the CMOs responsibility can be a challenging task, especially considering the difficulty of obtaining accurate and consistent data sources. TelmarHelixa has partnered with Legacy Media to integrate ESG ratings into our PLAN reach and frequency solution in the UK, addressing the growing demand for sustainable media planning. We are excited about the potential impact this initiative can have on the industry and are eager to expand to other markets in the near future.
Modelled on the 17 UN Sustainable Development Goals, Legacy Media has developed a proprietary ESG ratings methodology, using top-performing aggregated data to assign a rating to global media suppliers.
- Environment
- Community
- Employees
- Governance
By converting data into a standardized rating scale and thoroughly adjusting all scores for consistency, Legacy Media ensures that investors receive the most accurate and reliable assessment of a company's ESG performance. Moreover, by carefully weighting each ESG source based on its credibility and value, and aggregating the ratings at the category level, Legacy Media provides a comprehensive and actionable view of a company's ESG performance, empowering investors to make more informed and responsible investment decisions that align with their values and goals.
TelmarHelixa Technical Expertise
Drawing on our expertise in data engineering, TelmarHelixa has built on the Legacy Media framework methodology in order to apply ESG scores to media planning channels and vehicles in MediaPlanner. Our approach allows for a granular evaluation of each individual media vehicle as well as a comprehensive overview of the combined ESG impact of your media plan. When calculating the weighted ESG scores, we take the following variables into consideration:
- Consumption/usage of a specific media vehicle
- Stability value score for the campaign based on usage of known and unknown scored vehicles
- Additional ESG weighting contributions
- Spend per media (if available)
- GRP per media
Our media planning solution takes a holistic approach to evaluating ESG campaign performance by analyzing both traditional and digital media channels to provide a comprehensive view of your campaign's impact. This helps clients gain a complete understanding of their campaign's ESG effectiveness. With TelmarHelixa’s ESG ratings, you can create impactful and sustainable media campaigns, differentiate your media planning expertise and stand out in the RFI process.