Trade Unions to Assess How ESG Rating Agencies Incorporate Workers’ Rights into Ratings

The Global Unions’ Committee for Workers’ Capital (CWC) is launching a research project to assess how 10 of the world’s largest ESG rating agencies are incorporating labour rights into their company ratings.

This research will be carried out through a survey and analysis of public information. It is being led by UNI Global Union, the International Brotherhood of Teamsters, and the Global Unions’ Committee on Workers’ Capital (CWC) with support from Jobs with Justice. It builds on the engagement undertaken by the CWC with ESG rating agencies in 2016, which led to the adoption of the CWC’s Guidelines for the Evaluation of Workers’ Human Rights and Labour Standards.

ESG ratings agencies play an important role in the development of sustainability indices, investment products and evaluation of companies’ sustainability practices through the issuing of ratings. Since the CWC last investigated the methods and operations of ESG raters, there has been industry consolidation and a sizeable increase in the availability of ESG-branded products. Now however, ESG rating agencies are facing increased scrutiny from regulators. For example, in June 2023, the European Commission published a formal proposal for regulation covering ESG rating activities. Similar discussions are taking place in Japan and the United Kingdom. This has implications for rating agencies and the information they share about their methodology.

Controversies around ratings, the spotlight on systemic social risks following the pandemic, and the rise of human rights due diligence legislation have led to a renewed interest by trade unions in understanding whether rating methodologies have evolved and if so, to what extent fundamental labour rights are incorporated. The ESG Rating Agencies that will be included in the CWC-coordinated analysis are:

  • Bloomberg ESG Ratings
  • FTSE Russell ESG Ratings
  • ISS ESG Ratings & Rankings
  • Moody’s ESG (formerly, Vigeo-Eiris)
  • MSCI
  • Sustainalytics ESG Risk Ratings
  • Refinitiv ESG Scores
  • RepRisk ESG Rating (RRR)
  • S&P Global ESG Scores
  • Sustainable Fitch

The research will provide insights into how ESG Ratings Agencies are incorporating fundamental labour rights in their evaluation of companies’ ESG practices. The final report is expected in 2024. It will highlight key trends on how labour rights are incorporated in the ESG rating agency industry, draw out good practices, and propose a set of recommendations to strengthen ESG rating methodologies.