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All the best and good luck with your future choices ...

The Chairman, Ms Blanche Ullens De Schooten

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Introduction

In the last two decades, new elements – such as communication technologies and Internet – have created open and transparent financial markets, with the participation of growing segments of non-professional investors (through funds and pension funds or trading platforms), resulting in:

• greater attention to extra-financial issues, tangible and intangible, with repercussions on the level of trust;
• new assessments on the quality and long-term durability of listed financial products, whether related to companies (stocks, bonds, green bonds) or institutional issuers (such as government bonds).

Today, regulated markets, although they can be fallible and volatile, have evolved and are proving to be the most important and independent system in assessing the long-term sustainability of many human activities.

The conclusion of Standard Ethics is that we are facing the end of the classic financial era, focused exclusively on economic variables, which is why the Standard Ethics Rating makes a decisive contribution to the refinement of strategies, languages and ways in which an issuer operates on the market.

History

Standard Ethics draws its model and expertise from an Asset Management Company that was established in 2001 to manage Socially Responsible Funds.

In 2002, the Company started developing and promoting exclusively socially responsible investments. At the same time it started issuing sustainability ratings to companies and countries.

In 2004, after a spin-off, some major changes were made: it dismissed the Asset Management business, moved to Brussels, and focused its business on sustainability rating and scientific research, under the name of AEI Standard Ethics EEIG (European Economic Interest Grouping).

In 2014, Standard Ethics Ltd absorbed AEI Standard Ethics EEIG and became the first independent Sustainability rating agency with a standard methodology and a Proprietary Algorithm following the Applicant-pay Model: the client is the entity under rating that pays for a “solicited rating".

Why a Self-Regulated Rating Agency?

In the absence of supervisory bodies and international legislative standards for ESG solicited ratings, Standard Ethics has since the beginning of its activity, been self-regulating applying the models of credit rating agencies. In the main:

• Standard Ethics' clients are the companies that apply for a rating (Applicant-pay Model);

• In order to remain third party to investors, Standard Ethics does not provide any individual investor with advice, analysis or data regarding companies under rating;

• In order to offer uniformity in ratings, Standard Ethics has an ethically neutral approach and uses only UN, OECD and EU sustainability recommendations for reference;

• Standard Ethics uses a proprietary algorithm-based methodology to provide comparability, accuracy and transparency in its assessments;

• The disclosure of any rating action is regulated by internal procedures. The indications from ESMA are taken into account;

• Standard Ethics uses an "analyst-driven process", and does not use artificial intelligence or software either in data analysis or in decision-making;

• Chinese Walls, procedures, compliance offices and independent committees are part of Standard Ethics' structure;

• Standard Ethics also issues unsolicited ratings where it intends to conclude the analysis of a group of companies and offer stakeholders indices-benchmarks.  Standard Ethics' indices are Open Free Sustainability Indexes, which are self-funded, public and freely available both in their components and in the ratings assigned to each constituent.

The commercial test market was Italy where Standard Ethics had its first customers (listed and unlisted companies).