How to read an ESG rating How to read an ESG rating How to read an ESG rating

How to read an ESG rating

Ida Kassa Johannesen

Head of ESG investments, Saxo Bank.

Summary:  Environmental, Social and Governance (ESG) risks refer to the potential negative impact a company can have on the environment and society. Companies’ ESG risk ratings can help you reduce risk and enhance long-term performance, but do you know how to interpret such ratings? Check out the article below to get a better understanding of how to read an ESG risk rating.

How to read an ESG risk rating

ESG risk ratings measure a company’s exposure to ESG factors and how well a company manages those risks. ESG risk ratings are used by investors to identify companies with strong ESG practices and can help investors make better informed decisions. The ratings which are made up of a score and a category are available on Saxo’s platforms under the sustainability tab. 

What are ESG risk scores and how to interpret them 

In addition to the ESG risk score, there are 3 individual scores: an Environmental score, a Social score and a Governance score. The ESG risk score (the “score”) is made up of the 3 ESG pillars and is the sum of the individual Environmental, Social and Governance scores. The score which focuses on ESG risk, ranges from 0 to 100. The lower the score the better as this indicates low risk. A score of 0 is equivalent to no risk, while a score of 100 indicates severe risk. In the example below, Tesla's ESG risk score is 25 and the E, S and G scores are 3.3, 14.1 and 7.8 respectively. Tesla falls in the medium risk category.

    What do Environmental, Social and Governance scores measure?

    The Environmental score, the Social score and the Governance score measure the degree to which a company's value may be at risk driven by ESG factors.

    • Environmental factors include carbon footprint, use of natural resources, pollution and management of waste

    • Social factors are associated with workers’ safety and well-being, diversity, equity and inclusion, supply chain management and community engagement

    • Governance factors cover ethics and transparency, corporate practices (accounting, risk and audit), executive remuneration and the board of directors’ composition and quality

    What are ESG risk categories 

    There 5 ESG categories: Negligible, Low, Medium, High and Severe. Negligible and low categories are above average, Medium risk is average and High and Severe risks are below average

    • Negligible risk is assigned to companies with ESG risk scores ranging from 0-10 and is associated with the color dark green on Saxo's platforms
    • Low risk is assigned to companies with ESG risk scores ranging from 10-20 and is associated with the color light green on Saxo's platforms
    • Medium risk is assigned to companies with ESG risk scores ranging from 20-30 and is associated with the color yellow on Saxo's  platforms
    • High risk is assigned to companies with ESG risk scores ranging from 30-40 and is associated with the color orange on Saxo's platforms
    • Severe risk is assigned to companies with ESG risk scores ranging from 40-100 and is associated with the color red on Saxo's platforms

    The risk categories are absolute as they reflect the level of unmanaged ESG risk a company is exposed to. This means that companies from different sectors can be compared based on their category. 

    A company will have a good ESG risk rating score either because it is well-governed and manages its ESG risks well or because it is involved in activities that have low exposure to ESG risks.

    How to read an ESG risk rating 

    Which one is better? a company with a score of 25 or one with a score of 30? Based on Sustainalytics’ methodology, the company with the lower score is better than the company with the higher score, in terms of ESG risk. Looking at the scores below, Tesla, which has a score of 25 and is in the medium risk category, ranks better than Amazon which has a score of 30 and falls within the high risk category.

    It is worth noting however, that there are nuances to ESG risk scores. Investors who care about particular ESG factors should take a closer look at the individual components of the scores, namely the E, the S and G scores. For example, though Tesla and Alphabet have almost identical scores, 25 and 24 respectively, there are differences when it comes to their respective Environmental and Governance scores. Surprisingly, Alphabet’s E score is better than Tesla’s. Though Tesla’s contribution to a greener world is unrivalled, Alphabet has made significant strides over the years, achieving carbon neutrality in 2007 and matching 100% of its global electricity usage with renewable energy since 2017. 

    Where to find ESG risk ratings on Saxo's platforms

    ESG risk ratings are available on Saxo’s platform under the sustainability tab. The ratings are provided by Sustainalytics, an independent 3rd party owned by Morningstar. To find out more about a company's ESG scores, one could dig even deeper by reviewing the company's sustainability report, to get a better understanding of the ESG risks a company is exposed to, and the ESG practices used to handle those risks.   

    Quarterly Outlook 2024 Q2

    2024: The wasted year

    01 / 05

    • Macro: It’s all about elections and keeping status quo

      Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.

      Read article
    • FX: The rate cut race shifts into high gear

      As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.

      Read article
    • Equities: The AI and obesity rally is defying gravity

      Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.

      Read article
    • Fixed income: Keep calm, seize the moment

      With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.

      Read article
    • Commodities: Is the correction over?

      Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.

      Read article


    The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

    Please read our disclaimers:
    Notification on Non-Independent Investment Research (
    Full disclaimer (
    Full disclaimer (

    Saxo Bank (Schweiz) AG
    The Circle 38

    Contact Saxo

    Select region


    All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) Ltd. or the issuer.

    This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law. 

    The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

    If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.