ESG ratings on private companies usually measure how well a company has performed on environmental, social, and governance factors. This tries to measure how well a private company would handle its environmental footprints, its social concerns, and its governance practices.

What are some key points about ESG ratings on private companies?

Methodology: Rating agencies apply proprietary methodologies on private companies across several categories of ESG criteria.

Sources of data: The ratings can be based on publicly available information, company disclosures, or direct interaction with the company.

Issues: Compared to listed firms, private companies offer less public disclosure, which may, in turn, make the assessment of ESG more challenging to carry out.

Investors: Rating is helpful for investors when making private equity and debt investments into non-listed companies.

Benchmarking: Rating will help in benchmarking the private companies' ESG performance or industry standards.

Focus areas: Ratings can focus on issues such as carbon emissions, labor practices, board diversity, and ethical business conduct.

Transparency: Some rating providers break down the granular detail on how scores are calculated.