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At Morningstar Sustainalytics, we continuously evaluate and refine our research processes and methodologies to ensure they remain robust, transparent, and aligned with the evolving needs of our clients. That’s why, as of July 1, 2025, we no longer collect non-public information from issuers as part of our ESG Risk Rating or Low Carbon Transition Rating (LCTR) assessments. Below we explain what this change means for investors and issuers and outline the expected impact on our scores and data coverage.
No Negative Impact, Major Improvement
There will be no disruption for investors. This change will affect about 1% of our ESG Risk Rating scores, where the impact is expected to change scores by less than 2 points. We believe this shift will improve data transparency and consistency for investors, while encouraging companies to be more forthcoming about their environmental, social, and governance (ESG) practices. Increased transparency should lead to more feedback and ongoing investor-friendly improvements.
Why Did We Change Our Approach?
The change better aligns Sustainalytics with common ESG reporting standards, including the Sustainability Accounting Standards Board (SASB) in the US and the Corporate Sustainability Reporting Directive (CSRD) in the EU, both of which emphasize the use of publicly disclosed, standardized ESG data.
This change will also enhance the independence of our ratings by eliminating the potential for unequal treatment of information. From July 1 onward, we will capture only publicly disclosed data, and companies will be able to simply submit a public link – a small change that enables a more rigorous focus.
The simpler process will also enable analysts to complete assessments, and ultimately produce scores more quickly, further benefiting investors with the delivery of more up-to-date information. Despite the high volume of information submitted, our analysis shows that only about 1% of ESG indicators were influenced by non-public data, highlighting a significant imbalance between effort and impact.
What Influenced Our Decision?
We arrived at this decision through a mix of qualitative and quantitative data points. We considered over 8,000 indicators to test the impact of this decision. We concluded that about 1% of the 8,000 indicators used to assess our ESG Risk Ratings are assessed using non-public information. Just over 800 companies within our coverage universe, or roughly 5% of our universe, are impacted as they were assessed, in part, on non-public information. See Figure 1 below.
Our key conclusions:
- The average change in our ESG Risk Rating score for 75% of the firms tested was less than 2 points.
- Private firms had more significant score changes (about 4.3 points on average), due to a heavier reliance on non-public information to complete our research.
- Less than 1% of our risk scores will be impacted by more than 4-5 points.
Figure 1. How Removing Non-Public Information Minimally Impacts Risk Scores
How Are We Implementing This Change?
We are communicating this change in process widely to inform all stakeholders. We have updated the guidance on our Issuer Gateway portal to notify companies that we are no longer accepting non-public information for assessments. We have removed the ability for issuers to upload non-public information to our portal, and we have updated the relevant indicators that reference non-public information as part of the criteria.
Our analysts, beginning on July 1, 2025, will no longer accept any non-public information as a data point when assessing companies under our coverage. This change applies to all companies scheduled for an annual ESG Risk Rating update on or after July 1.
For companies, the updated process, relying solely on public information, will result in a simplified assessment experience, clearer expectations, and a more level playing field that promotes fair evaluations that align with market standards.
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