Morningstar Sustainalytics’ Controversy Ratings framework now offers distinct impact and risk signals when evaluating company incidents. Part one of this report laid out how a two-dimensional approach to assessing company incidents can help investors understand what drives events, support their investment decision-making, as well as regulatory compliance.

The second part of this report takes a closer look at the Controversy Ratings standardized assessment framework, delving into the key qualitative and quantitative factors used to measure impact and risk. In it we explain how risk and impact signals are measured and how they affect the final controversy rating.

Readers of this report will learn:

• The factors used to measure the impact of events, including scale, scope, remediation and role.
• The factors used to assess financial risk, including financial materiality and potential erosion of enterprise value.
• How these measures are combined to determine the overall controversy rating and how investors can interpret the outcome.