esg-ratings

# ESG Ratings

Retrieve and analyze Environmental, Social, and Governance (ESG) ratings and scores for public companies using the Octagon MCP server.

## Prerequisites

Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See [references/mcp-setup.md](references/mcp-setup.md) for installation instructions.

## Workflow

### 1. Identify Analysis Parameters

Determine the following before querying:
- **Ticker**: Stock symbol (e.g., MSFT, AAPL, TSLA)
- **Specific metrics** (optional): ESG score, environmental score, social score, governance score, industry rank

### 2. Execute Query via Octagon MCP

Use the `octagon-agent` tool with a natural language prompt:

```
Retrieve ESG ratings and scores, including risk rating and industry rank, for <TICKER>.
```

**MCP Call Format:**

```json
{
  "server": "octagon-mcp",
  "toolName": "octagon-agent",
  "arguments": {
    "prompt": "Retrieve ESG ratings and scores, including risk rating and industry rank, for MSFT."
  }
}
```

### 3. Expected Output

The agent returns comprehensive ESG data including:

**Key ESG Metrics:**
- MSCI ESG Rating (AAA to CCC scale)
- Sustainalytics ESG Risk Rating
- Composite ESG Score
- Environmental Score
- Social Score
- Governance Score
- S&P Global ESG Score
- Industry rank and categorization

**Example Response:**

| Metric | Value |
|--------|-------|
| MSCI ESG Rating | AAA |
| ESG Score | 65.19 |
| Environmental | 74.57 |
| Social | 58.08 |
| Governance | 62.93 |
| Industry | Enterprise and Infrastructure Software |

**Data Sources**: octagon-companies-agent, octagon-financials-agent, octagon-web-search-agent

### 4. Interpret Results

See [references/interpreting-results.md](references/interpreting-results.md) for guidance on:
- Understanding MSCI rating scale
- Interpreting Sustainalytics risk ratings
- Comparing E, S, and G component scores
- Industry ranking context

## Example Queries

**Standard ESG Analysis:**
```
Retrieve ESG ratings and scores, including risk rating and industry rank, for MSFT.
```

**Environmental Focus:**
```
Retrieve ESG ratings with focus on environmental scores and carbon emissions for AAPL.
```

**Comparative Analysis:**
```
Retrieve ESG ratings and scores for TSLA and compare to automotive industry peers.
```

**Governance Deep Dive:**
```
Retrieve ESG ratings with detailed governance scores and board diversity metrics for JPM.
```

## Key Metrics Explained

| Metric | Definition | Scale |
|--------|------------|-------|
| MSCI ESG Rating | Overall ESG assessment by MSCI | AAA (best) to CCC (worst) |
| Sustainalytics Risk Rating | Unmanaged ESG risk level | 0-100 (lower = less risk) |
| ESG Score | Composite sustainability score | 0-100 (higher = better) |
| Environmental Score | Climate, pollution, resource use | 0-100 |
| Social Score | Labor, community, human rights | 0-100 |
| Governance Score | Board, ethics, transparency | 0-100 |
| Industry Rank | Position vs sector peers | Percentile or rank |

## MSCI Rating Scale

| Rating | Category | Meaning |
|--------|----------|---------|
| AAA, AA | Leader | Best-in-class ESG performance |
| A, BBB, BB | Average | Mixed or average ESG performance |
| B, CCC | Laggard | Below-average ESG, higher risk |

## Analysis Tips

1. **Component imbalance**: A company may score high on Environmental but low on Governance—assess each dimension.

2. **Industry context**: ESG scores vary significantly by sector. Compare to industry peers, not cross-sector.

3. **Trend over time**: Request historical ESG data to see if ratings are improving or declining.

4. **Materiality**: Different ESG factors matter more in different industries (e.g., Environmental for energy, Social for retail).

5. **Multiple sources**: MSCI, Sustainalytics, and S&P may give different ratings—consider the consensus view.

## Use Cases

- **ESG screening**: Filter investments based on minimum ESG thresholds
- **Risk assessment**: Identify companies with high unmanaged ESG risks
- **Portfolio alignment**: Ensure holdings meet sustainability mandates
- **Engagement targeting**: Identify areas for shareholder engagement
- **Regulatory compliance**: Meet ESG disclosure requirements