At EcoInvestor, we believe that green finance must be rooted in transparency, rigor, and verifiable data. We do not rely on probabilistic models or black-box rating agencies. Every company audit we publish is evaluated against our strict, proprietary 30-point framework.
Our methodology is designed to cut through corporate greenwashing and focus on what genuinely matters: absolute emission reductions, verified biodiversity recovery, and ethical governance.
Here is exactly how we calculate a company's final ESG Rating.
1. Carbon Reduction & Net-Zero Strategy (10 Points)
We assess the company's trajectory toward genuine carbon neutrality. This section focuses heavily on Scope 1, 2, and 3 emissions.
- Absolute Emissions Reduction (3 pts): Has the company demonstrated a verifiable, absolute year-over-year reduction in Scope 1 & 2 emissions?
- Scope 3 Transparency (3 pts): Does the company accurately measure and report value chain emissions (Scope 3), which often represent the majority of their footprint?
- SBTi Verification (2 pts): Are their net-zero targets validated by the Science Based Targets initiative (SBTi) as aligned with a 1.5°C pathway?
- Renewable Energy Transition (2 pts): What percentage of their global operations are powered by verifiably additional renewable energy sources (not just unbundled RECs)?
2. Biodiversity Net Gain & Environmental Protection (10 Points)
Carbon is only half the battle. We heavily weight a company's physical impact on the natural world, a metric often ignored by traditional financial analysts.
- Supply Chain Deforestation (3 pts): Does the company have a strict, audited zero-deforestation policy for high-risk commodities (soy, beef, palm oil, timber)?
- Water Stewardship (3 pts): Are absolute water withdrawal metrics decreasing, especially in highly water-stressed operational regions?
- Biodiversity Net Gain (BNG) (2 pts): Has the company committed to and demonstrated a measurable positive impact on local biodiversity surrounding its direct operations?
- Pollution & Waste Management (2 pts): What is the percentage of operations transitioning to circular economy models (zero-waste-to-landfill, reduced single-use plastics)?
3. Ethical Governance & Corporate Record (10 Points)
A sustainable strategy is useless if the board of directors is not held accountable, or if the company actively lobbies against environmental regulation.
- Executive Compensation Link (3 pts): Is executive pay directly and significantly tied to the achievement of climate and biodiversity targets?
- Anti-Lobbying Transparency (3 pts): Does the company directly, or through trade associations, lobby against progressive climate legislation? (Negative points applied for regressive lobbying).
- Board Climate Competency (2 pts): Does the Board of Directors possess verifiable expertise in climate science, environmental law, or sustainable transition?
- Labor Rights & Equity (2 pts): Does the company uphold strong labor rights, pay living wages globally, and maintain transparent diversity, equity, and inclusion (DEI) metrics?
Final Grading System
After scoring a company out of 30, we assign a final Eco-Rating. This rating acts as a quick heuristic for eco-conscious investors:
- 26 – 30 Points (AAA - Green Chip): Industry leaders actively restoring the planet and redefining sustainable capitalism.
- 20 – 25 Points (AA - Strong): Solid transition strategies with verifiable progress, though minor gaps in Scope 3 or supply chain transparency remain.
- 15 – 19 Points (A - Acceptable): Meeting minimum compliance. Pledges are made, but execution is slow or overly reliant on carbon offsets rather than absolute reduction.
- 10 – 14 Points (B - Caution): Significant greenwashing risk. Targets lack scientific validation, and lobbying records may contradict public climate stances.
- 0 – 9 Points (C - Avoid): Companies actively contributing to climate breakdown, deforestation, or severe ecological degradation.
EcoInvestor audits are updated annually or following significant corporate policy shifts.