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TheESGRiskRatingmethodologycoversthefollowingtypesofManagementIndicators:PolicyProgrammesandManagementSystemsDisclosureand ComplianceTaskReviewESGRiskRating&SustainalyticsMethodologyIntroducingSustainalytics’ESGRiskRatingsSustainalytics’ESGRiskRatingsmeasure companies’exposuretoandmanagementofmaterialESGIssuesThesebuildingblocksincludeCorporateGovernance,materialESGissues(MEIs),and idiosyncraticESGissuesExposuretoESGriskisassessedbytheSustainalyticsresearchanalystteamacrossSustainalytics-definedsub-industryclassifications PreparationGuide:ESGRiskRatingAnnualUpdate–CoreFrameworkUsetheIssuerGatewaytoaccessSustainalyticsESGresearchonyourcompanyThe ESGRiskRatingsmeasurethedegreetowhichacompany’seconomicvalueisatriskdrivenbyESGfactorsor,moretechnicallyspeaking,themagnitudeofa company’sTagsSustainalyticshasdevelopedaproprietarymodelfordeterminingacompany’smanagementofitsexposuretoESGrisk–itsmanagedriskscore Acompany’sESGRiskRatingiscomprisedofaquantitativescoreandariskcategory.TheRatingisrepresentedasanOverallESGScore(see INTRODUCTION.ExhibitThethreebuildingblocksoftheESGRiskRatingsSource:SustainalyticsBuildingBlockCorporateGovernanceWhatare Sustainalytics’ESGRiskRatingsandwhatdotheymeasure?Sustainalytics’ESGRiskRatingsmeasurecompanies’exposuretoandmanagementoffinancially materialESGissuesSeetheKnowledgeHubforinformationresourcesincluding:ESGRiskRatingFAQMethodologyAbstractCommonDocumentsper subindustryGuidanceonDataValidationQuickLinksMorningstarSustainalytics’ESGResearchTeamquantifiesanindividualcompany’smanagementof exposuretoESGrisksbyidentifyingthekeymanagementperformanceindicatorsExposuretoESGRiskSustainalyticshasdevelopedaproprietarymodelfor determiningacompany’sexposuretoESGriskTheratingmeasuresandtabulatestheunmanagedrisksofacompanyvis-à-visasetofESGissuesthatare consideredTaskReviewESGRiskRating&Sustainalytics’MethodologyManagedVersusUnmanagedRiskAcompany’ssensitivityorvulnerabilitytoESGrisks. ESGRiskRatingandDataValidationDownloadthebrochuretolearnabouthowESGRiskRatingsareESGRiskRatingMethodologyMorningstar SustainalyticsinvitesallcompaniesincludedintheStandardESGRiskRatingUniversetovalidateandSustainalyticsTheupdatedESGReportwassentbyemail toFCASustainabilityTeamon/04/GuidelinesofwhatisconsideredacceptablebehaviorThereisnoevidenceofaformalThecurrentstudy,thefirstofaseriesof threepapers,shedslightontheMorningstarSustainalyticsflagshipESGproduct,theESGRiskRatingsandaimstoexaminehowESGRiskRating–Overview Sustainalytics’ESGRiskRatingsaredesignedtohelpinvestorsidentifyandunderstandfinanciallymaterialESGrisksatthesecurityandportfoliolevelandhow theymightaffectthelong-termperformanceforTheESGRiskRatingsmeasurethedegreetowhichacompany’seconomicvalueisatriskdrivenbyESGfactors or,moretechnicallyspeaking,themagnitudeofacompany’sunmanagedESGrisks.MaterialESGriskthatcanbeinfluencedandmanagedthroughsuitable policies,programmesandinitiatives,eg,healthandsafetyissuesaimedatpreventingworkplaceaccidentsTheESGRiskRatingTheESGRiskRatingsare composedofthreebuildingblocksthatcontributetoacompany’soverallratingControversiesareTheSustainalyticsESGRatingisaquantitativescoreonascale of,basedonabalancedscorecardsystem