Category: ESG fundamentals · Reviewed by Al Jabbar, Broker · Specialist Risks · Last reviewed 2026-06-10
Sustainalytics ESG Risk Ratings are produced by Morningstar Sustainalytics and measure the magnitude of a company’s unmanaged ESG risk on a quantitative scale from “negligible” to “severe”. They are one of the three most widely used ESG rating systems among UK insurers, alongside MSCI and S&P Global.
Category: ESG fundamentals Also known as: Sustainalytics ESG Risk Rating, Morningstar Sustainalytics, Sustainalytics ESG score Established / Date: Sustainalytics founded 1992; ESG Risk Ratings launched September 2018; acquired by Morningstar April 2020 Related concepts: ESG ratings, MSCI ESG ratings, S&P Global ESG
The Sustainalytics ESG Risk Rating uses a two-dimensional methodology to express the company’s exposure to material ESG issues and its management of those issues. The output is a numeric score representing unmanaged risk: a low number indicates better risk management or lower exposure, while a high number indicates worse. The numeric score is mapped to five risk categories: negligible (0–9.99), low (10–19.99), medium (20–29.99), high (30–39.99) and severe (40+).
The methodology, formally documented in the “Morningstar Sustainalytics ESG Risk Ratings Methodology Abstract” [1], identifies material ESG issues at sub-industry level, scores corporate exposure and management practice for each, and combines these into the overall unmanaged risk score. The framework is conceptually distinct from MSCI’s letter-grade peer-relative system because Sustainalytics’ score is absolute rather than industry-relative, meaning a high-exposure sector cannot achieve a “negligible” rating purely by outperforming peers.
Sustainalytics ESG Risk Ratings cover more than 16,000 companies globally and are referenced in numerous index, fund and benchmark products.
Morningstar Sustainalytics, the rating issuer, is part of Morningstar Inc. (a US-listed company), and its rating business has operated outside the UK regulatory perimeter. The forthcoming UK ESG ratings regime announced by HM Treasury in November 2023 will bring this activity within the FCA’s scope, expected from 2026 [2]. The EU equivalent, Regulation 2024/3005, applies from 2 July 2026 and will impose authorisation and conduct obligations on rating providers offering services in the EU.
UK regulated firms relying on Sustainalytics data must apply the methodology with appropriate scepticism under the FCA’s PS23/16 SDR regime and the PRA’s SS 3/19 climate risk expectations [3][4]. The IOSCO Good Practices for ESG Ratings and Data Products Providers of November 2021 underpin both UK and EU supervisory approaches.
UK insurance companies use Sustainalytics ESG Risk Ratings extensively for investment portfolio screening. Several major UK insurers reference Sustainalytics data in their TCFD disclosures and Climate Financial Risk Forum guidance submissions. The absolute (non-peer-relative) scale is sometimes preferred by underwriters and investment officers because it provides a more conservative reading on high-exposure industries: a coal-heavy company cannot be a “Leader” by outperforming weaker peers.
For underwriting purposes, the rating is most often used in support of D&O liability, professional indemnity and large corporate property underwriting. Lloyd’s managing agents may incorporate Sustainalytics scores into their pre-bind ESG due diligence checklists. The Association of British Insurers does not endorse any particular ESG rating provider.
UK businesses subject to Sustainalytics coverage should monitor their rating and engage with the issuer to verify input data. Sustainalytics offers a Subject Company Verification programme through which companies receive a draft of their Rating Report for review before publication.
Insurers underwriting D&O programmes for large UK corporates may use a Sustainalytics “high” or “severe” rating as a trigger for enhanced underwriting questions. Conversely, a “negligible” or “low” rating may support flat or improved renewal terms, particularly when combined with TCFD disclosures aligned with section 414CB of the Companies Act 2006.
A UK-listed mining group with significant copper and lithium exposure is rated by Sustainalytics at 28 (medium ESG risk). At renewal of its £50 million D&O programme, the lead Bermuda-fronted Lloyd’s underwriter cites the rating alongside the company’s published TCFD disclosure and human rights due diligence statement. The Key Material ESG Issues from the Sustainalytics report (community relations, occupational health and safety, environmental management) shape the proposal form questions. The underwriter accepts the renewal at a 5% uplift with a community relations and human rights litigation sub-limit of £5 million.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-10. Next review: 2026-12-10.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
Get a quote