Prime climate risk ratings | Insight Investment | Insight Investment

The Prime climate risk ratings are applied to corporate entities and aim to highlight key climate risks. They are based on extensive raw data, which is applied to generate scores for 15 key issues across a range of themes, which are categorised as either physical or transition risks. The Prime climate risk ratings range from 1 (best possible) to 5 (worst possible).

The Prime climate risk ratings use inputs from multiple data providers, which are curated by Insight’s Responsible Investment Team who adjust them for materiality, quality and relevance for the key climate issue or issues to which they pertain.

These data are then used to generate scores across 15 key climate issues, which are in turn weighted to derive scores across various themes such as governance and regulation.

Based on the theme scores, a company is assigned a physical risk rating and a transition risk rating. The worst of these ratings is the company’s overall climate risk rating.

The ratings are updated quarterly, though some underlying data may be updated less frequently.

The Prime climate risk rating aims to reflect the level of climate risk faced by a specific company, whether that is transition or physical risk, that could affect whether the company defaults on its debt. The Prime climate risk ratings range from 1 (best possible) to 5 (worst possible).

The Prime climate risk ratings cover c.9,500 issuers.

Insight's credit analysts and portfolio managers can use the Prime ratings to support their regular research on corporate debt issuers.

Any risks flagged by the system may prompt further investigation or proactive engagement and dialogue with a debt issuer, to investigate issues further, to ensure the highlighted risks are appropriately managed, or to encourage a change in corporate behaviour to mitigate the identified risk. Insight’s Responsible Investment Team also uses the ratings to monitor company performance and set engagement priorities.

For more information on Insight’s programme of engagement with companies, please see our annual stewardship report. In 2022, we conducted over 1,240 engagements with debt issuers, of which the majority included some form of ESG dialogue. These included over 140 engagements focused solely on ESG issues.