From Morningstar:

The importance of governance in sustainable investing is often overlooked, but it has a significant impact on a company’s long-term prospects and returns. Morningstar Sustainalytics’ Governance Risk Score is being used to assess how exposed FTSE 100 companies’ revenues are to governance-related issues, with the highest score belonging to mining giant Glencore at 12.64.

Listed companies on the London Stock Exchange and included in the FTSE 100 must have certain governance procedures in place, resulting in higher scores on the Governance Risk Score scale. Companies with average ESG risk management, like Admiral, have relatively high exposure to governance risk. Only 20 FTSE 100 stocks are classified as having average ESG risk management.

The highest risk exposure in the consumer cyclical sector belongs to betting company Flutter Entertainment, with a portfolio governance risk score of around 6.70 for a FTSE 100 tracker fund. The largest disparity in governance risk scores is seen in the basic materials sector, with companies like Mondi scoring 2.50 and Glencore scoring 12.64.

The UK Corporate Governance Code, a key part of UK listing rules, is expected to be updated soon, with a focus on transparency and disclosure to balance the risks of a new regime. The Financial Reporting Council also plans to engage with stakeholders on a review of the UK Stewardship Code, as part of the white paper “Restoring Trust in Audit and Corporate Governance” to promote growth and competitiveness.



Read more: How Well Are FTSE Firms Governed?