====== Vigeo Eiris ======
Vigeo Eiris (now part of [[Moody's ESG Solutions]]) is a global leader in providing research and ratings on a company's environmental, social, and governance performance. Think of it as a credit rating agency, but for a company's character and sustainability instead of just its ability to pay back debt. Investors, especially those practicing [[sustainable investing]] or [[socially responsible investing (SRI)]], rely on Vigeo Eiris's analysis to understand risks that don't show up on a traditional [[balance sheet]]. For example, a company might look profitable, but if it’s polluting a river or has terrible labor practices, it could face massive future fines, lawsuits, and reputational damage. Vigeo Eiris digs into these non-financial details, scoring companies on hundreds of criteria to give investors a clearer picture of their long-term viability and ethical standing. Originally a merger between two European agencies, Vigeo and Eiris, the firm was acquired by [[Moody's Corporation]] in 2019, integrating its expertise into a broader suite of risk assessment tools.
===== How Does the Analysis Work? =====
Vigeo Eiris doesn't just take a company's word for it. Their process is like a deep-dive investigation.
  * **Data Collection:** They gather information from public sources like annual reports, but they also look at media coverage and input from stakeholders like non-governmental organizations (NGOs) and trade unions.
  * **Framework-Based Analysis:** They assess this mountain of data against a robust framework built on international standards, such as the United Nations Global Compact and International Labour Organization conventions.
  * **Scoring and Rating:** Each company is scored on a scale (typically 0-100) across various criteria. This allows for direct comparison between competitors in the same industry. A high score suggests a company is actively managing its [[ESG]] risks and opportunities, while a low score waves a red flag.
===== What Exactly Do They Measure? =====
The ESG acronym covers a vast territory. Vigeo Eiris breaks it down into three core pillars.
==== The 'E': Environmental ====
This looks at a company's impact on the planet. Key areas include:
  * Energy consumption and use of renewables
  * Greenhouse gas emissions
  * Water and waste management
  * Impact on biodiversity
==== The 'S': Social ====
This pillar focuses on how a company treats people—its employees, customers, and the wider community.
  * Human rights policies, especially in the supply chain
  * Employee relations (e.g., health, safety, diversity)
  * Product safety and quality
  * Community engagement and social impact
==== The 'G': Governance ====
This is all about how a company is run. Strong governance is often a sign of a well-managed, [[shareholder]]-friendly business.
  * Board independence and effectiveness
  * Executive compensation policies
  * Shareholder rights and protections
  * Business ethics, including anti-corruption measures
===== The Value Investor's Perspective =====
At first glance, ESG might seem like a concern only for ethical investors, but a savvy [[value investing]] practitioner sees it differently. For a value investor, risk management is paramount. ESG data from firms like Vigeo Eiris provides a critical lens for identifying hidden risks that could destroy shareholder value.
A company with poor governance (the 'G') might be misallocating capital or enriching management at the expense of owners, directly eroding its [[intrinsic value]]. A company with a terrible environmental record (the 'E') could be sitting on a ticking time bomb of future cleanup costs, fines, and regulatory headaches—a massive hidden [[liability]]. These are not //soft// issues; they are **hard** financial risks.
By incorporating ESG analysis into a broader [[fundamental analysis]], an investor can gain a more complete understanding of a company's quality and resilience. It helps ensure that a seemingly cheap stock isn't a "value trap" poised to underperform. In this sense, ESG data is a powerful tool for strengthening one's assessment of a company's true [[margin of safety]]. It's not about sacrificing returns for principles; it's about using principles to protect and enhance returns.