what marks us outfrequently asked questions
1. General
Who is behind oekom research AG?
At whom are oekom research’s ratings targeted?
Is it possible to see copies of the different rating reports?
How is the research team organised?
What partnership and membership links does oekom research have?
How are oekom research’s analyses used?
2. Criteria
What is particular attention paid to in the ratings?
How are the research criteria selected?
At what point in the analysis process are economic criteria included?
Is oekom research’s rating approach sector-specific?
Is there a facility for customising exclusion criteria?
How are the exclusion criteria integrated into the analysis process?
What is oekom research’s stance on the standardisation of criteria and evaluation procedures?
How are the norms and threshold values of indicators determined?
How are the weightings of individual indicators and criteria determined?
3. Rating process
How are the companies to be evaluated selected?
Does oekom research send out a questionnaire to the companies?
Is there a compulsory set method for obtaining information?
What procedure does oekom research adopt with companies which fail to supply any information on environmental and social issues?
How is the evaluation made?
4. Quality
Is the information from companies cross-checked by oekom research?
Does oekom research carry out plausibility checking?
What action does oekom research take in order to safeguard the quality of the information obtained and of the evaluation process?
How does oekom research ensure the independence of the ratings?
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1. General
Who is behind oekom research AG?
oekom research AG’s shareholders consist primarily of private investors (holding approx. 86% of shares) together with a small group of institutional investors, which includes our associated publishing company, ökom Verlag, two church investors, an environmental foundation, an environmental media agency, and another environmental publishing house (holding approx. 14% of shares in total). In order to safeguard our independence and to prevent any conflicts of interest, our shareholders do not include any company whose performance we analyse and evaluate.
At whom are oekom research’s ratings targeted?
Our ratings are targeted principally at institutional investors and financial service providers as well as companies.
Is it possible to see copies of the different rating reports?
Yes, please take a look at the respective .pdfs: oekom Corporate Rating and oekom Country Rating.
How is the research team organised?
Our ratings are generally carried out on a sector-specific basis. To this end, we set up teams of analysts, each co-ordinated by a team leader. The Head of Research oversees the work of all the teams.
What partnership and membership links does oekom research have?
oekom research’s analysts operate as part of a close international network of NGOs and academic institutions in order to give the ratings a broader base and to back them up with scientific findings.
oekom research is a partner to CRIC (Corporate Responsibility Interface Center), an association of investors which promotes ethical investment based on the Frankfurt-Hohenheim Guidelines. We also collaborate in the area of quality standards and quality control with the industry federation Rating Cert, whose members comprise analysts, rating advisors and rating agencies.
In addition to the above, oekom research is a founding member of the Forum Nachhaltige Geldanlagen [the German Sustainable Investment Forum] as well as being a member of the UKSIF, the Social Investment Forum (US), the Umweltakademie [Environment Academy] and the Bundesverband Deutscher Stiftungen [Federal Association of German Foundations].
How are oekom research’s analyses used?
Our research is incorporated in the decision-making of 60 ethical and sustainable portfolios. Our analyses and evaluations are also used for a variety of assignments in the field of private investment consultancy. We provide research for assets totaling more than 90 billion euros (06/2010). Further details regarding this can be found in the "references” section.
2. Criteria
What is particular attention paid to in the ratings?
We focus particularly on ensuring that all relevant subject areas are examined as part of the environmental and social analyses. We do not confine ourselves simply to evaluating companies’ policies and declarations of intent, but analyse the products, production processes, environmental pollution, etc. which are specific to the sector. The objectivity of the results is maximised through wide-ranging research using external sources. This process, which is extremely detailed and exacting, is supported by a network of international experts.
How are the research criteria selected?
The Frankfurt-Hohenheim Guidelines (FHL), which are deemed to be one of the world’s most comprehensive set of ethical criteria for evaluating companies’ performance, provide the basis for the environmental, social and cultural criteria of the oekom Corporate Rating. (Cf. Walker, Jim & Farnworth, Emily: Rating organisations – what is their impact on corporate sustainability strategy? URS Corporate Sustainability Solutions, UK 2001).
The FHL were drawn up by the "Ethical-ecological Rating” project team headed by the scientists Prof. Johannes Hoffmann and Prof. Gerhard Scherhorn in a study conducted over several years and comprise a total of over 100 criteria. Working together with the project team, oekom research has adapted the FHL criteria for practical use. This process has yielded 200 criteria which are usable in practice and which serve as a basis for our oekom Corporate Rating.
Our rating methodology is regularly updated to take account of the latest developments. The tasks of drawing up and modifying criteria are carried out in close collaboration with the " Ethical-ecological Rating” project team and with the members of our advisory board.
More detailed information about the research criteria can be found here.
At what point in the analysis process are economic criteria included?
As a general rule, no economic criteria are included in our rating except in a few isolated cases such as the evaluation of sponsorship budgets. In our opinion, analysis of the various environmental and social areas on the one hand and financial analysis on the other should be kept strictly separate from one another so as to avoid long-term conflicts of interest.
Is oekom research’s rating approach sector-specific?
Yes, we follow a distinctly sector-specific approach, particularly as far as products and services are concerned, since each sector faces different challenges. The sector-specific nature of our rating approach is one of its major strengths compared with the approaches taken by our competitors.
Is there a facility for customising exclusion criteria?
Normally, exclusion criteria are defined jointly by the investor, the authorised investment management company and oekom research. Specific customer requests are, however, taken into account in every case.
You can see the negative criteria we examine as standard here.
How are the exclusion criteria integrated into the analysis process?
Exclusion criteria are designed to give investors the opportunity to use their individual moral judgements as a basis for excluding securities from an investment. It is possible that an investor will rule out investing in securities of a company or a country which generally handles environmental or social issues responsibly, because the company or country concerned is linked with particular business areas and practices that are controversial. For this reason, the exclusion criteria and the ratings must be viewed independently of one another. oekom research examines companies and countries in accordance with the negative criteria stipulated by the customer and offers its recommendations. Decisions about whether to exclude a security, however, lie with the customers themselves. Through this approach we aim to give our customers as much scope as possible for tailoring their investments to their individual requirements.
What is oekom research’s stance on the standardisation of criteria and evaluation procedures?
We are of the opinion that standardisation will be possible only to a certain extent owing to the highly diverse nature of customer requirements. Nevertheless, transparency in terms of the methods used by rating agencies is important so as to enable monitoring of the reliability and quality of the methods. Process-specific quality standards, as applied by oekom research, are therefore desirable.
You can see our quality standard here.
How are the norms and threshold values of indicators determined?
The way in which indicators are to be evaluated is laid down precisely in our evaluation manuals. The form which the indicators are to take is stipulated internally as part of regular co-ordination processes. In addition, we continuously exchange information with individual members of our advisory board with regard to fundamental changes to the way in which we apply criteria in practice and we submit a report on these to the board twice a year.
How are the weightings of individual indicators and criteria determined?
Environmental and social ratings are weighted according to their relevance to the sector concerned. Further information on this can be found in the section "corporate rating". The weighting of individual criteria within the two sections of the rating varies depending on their relevance to the sector concerned. In addition, the weighting of criteria is also dependent on the product range of the company and the proportions of turnover applicable in each case. We have always maintained a high degree of transparency, which enables both the users of the ratings and the companies evaluated to obtain a thorough understanding of the weighting of criteria.
3. Rating process
How are the companies to be evaluated selected?
In a particular sector, we normally evaluate the largest and most important companies which are listed in recognised indices like the MSCI World index. In addition, we also respond to specific requests from investors and conduct ratings of securities which do not fit this pattern.
You can find information on our current level of coverage of the indices at ratings & assessments.
Does oekom research send out a questionnaire to the companies?
In order to keep the costs for companies as low as possible, we no longer send out questionnaires. We draw up a preliminary rating based on all the information which is made available to us by the companies. This is sent to the companies with a request for comments on and amendments to the information presented in the rating. We then incorporate this additional information into the ratings and supplement it with the results of external research.
We have set out a diagram illustrating the rating procedures here.
Is there a compulsory set method for obtaining information?
Our analysts contact the relevant personnel in the company and inform them about our rating project. Companies are requested to send us all available documents relating to their environmental and social/cultural activities. A preliminary rating is drawn up based on these documents and this is sent to the managers responsible in the company with a request for feedback and for any omitted information to be added.
The companies are granted sufficient processing time to do this. As part of this feedback process, telephone interviews are also conducted with individual representatives of the company.
To supplement this intensive dialogue with the companies themselves, we also incorporate data from independent information sources. These include, in particular, international NGOs, academic institutions and government authorities; we also regularly analyse a large number of international media sources and databases.
Prior to completion of the rating, we enter into a second round of feedback with the companies in order to give them another opportunity to comment on the information and ensure that it is complete.
What procedure does oekom research adopt with companies which fail to supply any information on environmental and social issues?
Since we have an obligation toward our customers to make statements on the environmental and social performance of companies, the companies requested by the customer are always analysed. If a company reveals itself to be uncooperative or fails to provide adequate information, then we carry out what is referred to as an outside rating of this company. This differs from the oekom Corporate Rating, also known as an inside rating, in that it is drawn up solely on the basis of publicly available information.
How is the evaluation made?
All the survey criteria are evaluated individually and independently of one another. The evaluations are then integrated into the rating using the appropriate weightings for each of the criteria. In order for the results within a sector to be comparable, the weightings are generally the same for all companies in the sector.
4. Quality
Is the information from companies cross-checked by oekom research?
We use wide-ranging external research in the media and databases and among NGOs, trades’ unions, public authorities and academic experts to verify important data from companies and to locate additional information.
Does oekom research carry out plausibility checking?
We check not only our own evaluations but also the information supplied by companies for plausibility. The latter is cross-checked through wide-ranging searches of external sources.
oekom research applies the dual-verification principle in all its ratings. In addition, regular analysts’ meetings are held internally in order to discuss evaluation issues. Methods and results are regularly examined with the advisory board and with the "Ethical-ecological Rating” project team.
What action does oekom research take in order to safeguard the quality of the information obtained and of the evaluation process?
Detailed sector-specific evaluation manuals provide the analysts with clear evaluation guidelines for evaluating each individual survey criterion. The high quality of our sustainability analyses is underpinned by a comprehensive quality standard to which all oekom research’s employees have to sign up. As one of the first rating agencies, oekom research has been certified against the European Voluntary Quality Standard CSSR-QS in March 2009.
How does oekom research ensure the independence of the ratings?
Our independence is an asset of great value to our work and our credibility. We therefore avoid business links and services which could threaten this independence. In order to do so, we confine our work exclusively to analysing companies and countries and advising our customers. Customers are responsible for the management of their assets. In order to avoid conflicts of interest, we do not provide any consultancy services for those companies which are analysed by us in the ratings.
