ESG criteria — investor and ratings benchmarks
The practical ESG criteria UK investors and rating agencies use across the three pillars — quantitative KPIs, UK-specific benchmarks from MSCI, Sustainalytics, Moody’s and S&P Global, and how UK SRS S1 and S2 codify the criteria into mandatory disclosure from 2027.
What ESG criteria look like in practice
ESG criteria are the specific, quantitative KPIs and qualitative assessments used to evaluate corporate ESG performance — by investors, rating agencies, lenders and increasingly regulators.
What investors and ratings agencies measure on E
Climate is the most quantified pillar. GHG emissions across three scopes, energy, water and increasingly nature exposure are the baseline.
- Scope 1 + 2 GHG emissions Core metric
- Direct (Scope 1) and purchased-energy (Scope 2) emissions in tCO2e, calculated under GHG Protocol Corporate Standard. Location-based and market-based both required for Scope 2. Mandatory under SECR for ~11,900 UK companies and under UK SRS S2 from 2027.
- Scope 3 GHG emissions Critical metric
- Value-chain emissions across 15 GHG Protocol categories. Cat 1 (purchased goods), Cat 11 (use of sold products) and Cat 6/7 (travel/commuting) are most commonly disclosed. Mandatory under UK SRS S2 from 2027 with comply-or-explain in year one. Often 70-90% of a company's total emissions.
- Emissions intensity Comparison metric
- tCO2e per £ revenue, per unit of production, per FTE. Used by rating agencies for industry-relative benchmarking. UK SRS S2 requires at least one industry-relevant intensity metric.
- Internal carbon price Strategic metric
- Notional price applied internally to GHG emissions, used for capital allocation decisions. UK SRS S2 requires disclosure where used. Typical UK practice: £40-£150/tCO2e.
- Climate target alignment Strategic metric
- Whether absolute targets are SBTi-validated against 1.5°C, well-below-2°C or 2°C scenarios. Progress vs base year. UK SRS S2 requires disclosure of targets and performance.
- Water intensity / consumption Metric
- Total water consumption, intensity by revenue or production unit, water-stressed-area exposure. Material for utilities, agriculture, mining, food and apparel. Reference: CDP Water, SASB industry standards.
- Biodiversity / nature exposure Emerging metric
- TNFD-aligned (Taskforce on Nature-related Financial Disclosures) reporting on nature-related dependencies and impacts. Increasingly material for primary industries.
What investors and ratings agencies measure on G
Anchored on the FRC Corporate Governance Code and Companies Act 2006 strategic-report regime. Investors look closely — weak governance often signals problems in the other pillars.
- Board composition and independence FRC Code metric
- % independent non-executive directors (FRC Code expectation: at least half excluding chair). Board size, tenure, expertise mix. Mandatory disclosure in the corporate governance report.
- Board diversity Mandatory UK metric
- Gender and ethnic diversity targets: 40% female board (FTSE Women Leaders Review); at least one director from ethnic-minority background (Parker Review). Mandatory disclosure under FCA Listing Rule LR 9.8.6R since 2022.
- CEO pay ratio Mandatory UK metric
- Ratio of CEO total remuneration to median, 25th-percentile and 75th-percentile employee pay. Mandatory under Companies Act 2006 s.421 for UK quoted companies with 250+ UK employees since 2019.
- Executive remuneration linked to ESG Strategic metric
- Whether executive pay (LTIP, annual bonus) is linked to ESG metrics — climate, safety, DEI. Investors increasingly expect at least 10% of LTIP weighted to ESG. UK SRS S2 requires disclosure of climate-related remuneration linkage.
- Anti-corruption and ethics Core metric
- Anti-bribery policy coverage, training hours per FTE, whistleblower mechanism quality, reported breaches. UK trigger: Bribery Act 2010 (adequate procedures defence requires demonstrable policy + training).
- Audit and internal control FRC metric
- Audit committee composition (FRC expectation: independent, with financial expertise). External-auditor tenure and rotation. Internal-control framework. Forthcoming Audit Reform Bill will strengthen requirements.
- Shareholder voting Engagement metric
- % votes against management on remuneration, director re-election, accounts. Above 20% triggers expectation under the Investment Association Public Register that the company explains how it has addressed concerns.
- Tax transparency Emerging metric
- Effective tax rate, country-by-country tax disclosure (UK CbCR Regulations 2016), public tax strategy. GRI 207 sets the leading voluntary standard.
How rating agencies weight the criteria
MSCI, Sustainalytics, Moody’s and S&P Global apply industry-specific weights to ~20–35 key issues per company. The weights are where the analytical judgment sits.
MSCI ESG Ratings methodology
MSCI assigns letter ratings from AAA (leader) to CCC (laggard) using ~35 key issues across 13 themes within E, S and G.
Industry weights vary: energy companies see ~50% weight on E; financials see ~50% on G.
Companies are benchmarked against industry peers and assessed on both risk exposure and management quality.
From 29 June 2028, MSCI ESG Ratings UK will require FCA authorisation under the ESG Ratings Order 2025.
ESG criteria — frequently asked
Typical criteria, how MSCI and Sustainalytics work, UK SRS criteria, and UK-specific criteria.
What are typical ESG criteria?
Environmental: Scope 1/2/3 GHG emissions, energy intensity, water consumption, waste diverted from landfill, biodiversity exposure.
Social: gender pay gap, % female board, lost-time injury rate, employee turnover, supplier audit coverage, modern slavery disclosure.
Governance: % independent directors, board diversity, CEO pay ratio, anti-corruption training coverage, whistleblower mechanism quality, vote outcomes against management at AGM.
How do MSCI and Sustainalytics ESG ratings work?
MSCI assigns letter ratings AAA (leader) to CCC (laggard) using ~35 key issues weighted by industry materiality.
Sustainalytics scores ESG Risk on a 0-50+ scale (lower is better) measuring unmanaged risk.
Both use industry-relative benchmarking.
From 29 June 2028, UK ESG ratings providers including these will require FCA authorisation under the ESG Ratings Order 2025.
What ESG criteria are used in UK SRS reporting?
UK SRS S2 (Climate-related) requires specific disclosures on governance (board oversight), strategy (transition plan, scenario analysis), risk management (climate risk integration), and metrics & targets (Scope 1/2/3 GHG emissions, internal carbon price, cross-industry metrics, industry-specific metrics).
UK SRS S1 will require similar architecture for broader sustainability topics where material.
Are there UK-specific ESG criteria?
Yes.
UK Corporate Governance Code criteria (board independence, audit committee composition, succession planning) apply to premium-listed companies.
SI 2022/31 mandates eight climate-specific disclosures for 500+ employee companies.
SECR mandates four energy-and-carbon metrics for large companies.
Gender Pay Gap Reporting Regulations mandate annual median and mean pay-gap reporting for 250+ employee companies.
The ESG guide set
From criteria, continue to practical reporting, software and strategy.
What is ESG?
Definition, history, three pillars, UK frameworks.
ArchitectureThe three ESG pillars
Environmental, Social, Governance — what each covers.
FrameworksESG frameworks — UK comparison
UK SRS, GRI, SASB, TCFD, CDP, ESRS compared.
StandardsESG standards — UK regulatory landscape
UK SRS, FCA SDR, SECR, SI 2022/31 — the standards-based regime.
HubESG reporting — UK hub
Three-layer UK system; UK SRS backbone.
DataESG data management
Collection, verification, audit-readiness for UK reporting.
Related guides & references
Primary references
UK regulators, rating agencies and standards bodies cited throughout this page.
What investors and ratings agencies measure on S
The hardest pillar to standardise, but UK regulatory disclosure provides anchor metrics: gender pay gap, modern slavery statement, workforce policies.