Just 30% of more than 4,200 companies analyzed by Morningstar Sustainalytics ESG Risk Ratings have a strong level of board independence, defined as independent directors representing at least two-thirds of the board, according to new research on the materiality of corporate governance.

In fact, at a time when corporate governance practices are under increasing levels of scrutiny, the majority of companies analyzed by Sustainalytics’ ESG Risk Ratings for its latest study are considered middle-of-the-road in terms of corporate governance management scores. The leading global provider of ESG risk ratings, data and research recently upgraded its corporate governance methodology and results show more than 60% of companies between 40-70 on a scale of 0 to 100, with a high score demonstrating positive practices.

Distribution of Corporate Governance Management Scores in Sustainalytics’ ESG Risk Ratings Universe

Related Article: Morningstar Sustainalytics Enhances ESG Risk Ratings with Major Updates to Methodology and Measures

Henry Hofman – ESG Research Director, Corporate Governance, Morningstar Sustainalytics:

“Corporate governance is not only a core component of ESG, but also a material part of any investment decision. At its best, it can help ensure alignment, transparency and trust between investors and management. At its worst, it can be the root cause behind the collapse of long-standing institutions. Robust measures of corporate governance practices should play an important role in any investment approach.”