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We recently launched a range of socially responsible portfolios, and environmental, social and governance (ESG) scoring for all Nutmeg portfolios to help investors better understand how their investments align with their values. As part of our goal to demystify this area of investing, we’re publishing a series of analysis pieces looking at ESG scores in more detail. In this blog we look at how ESG metrics vary with geography from market to market, driven by different sectors, industries and economic drivers.

For the purposes of our analysis, each region is represented by its most commonly followed market index, the UK by FTSE100, USA by S&P500 and the rest by the corresponding large & mid cap MSCI index.

The scoring data we use at Nutmeg is obtained from MSCI, an acknowledged leader in ESG research and analytics. Each category is scored from 0-10, where a higher score signifies better adherence to the corresponding principle from the underlying companies. We’ve also included a comparison for how the average Nutmeg SRI portfolio scores in each area and included the MSCI All Country World Index as a representation of how global equites score in aggregate (though it’s worth bearing in mind that the MSCI ACWI score will be influenced by its largest geographic exposure, which is the United States at over 50%). Further details on the metrics and their full definitions can be found in our white paper.

Starting with the environmental score (the E in ESG), we see that European equities generally score higher than the global equity average at above 6.0, followed by the Nordic countries, Japan and the US. A higher score means that companies in this group are better positioned at managing key environmental risks and opportunities such as climate change, pollution and the use of natural resources.

Source – MSCI ESG Manager

It’s important to note that these scores can be driven by sectoral differences in the regions’ respective major equity indices. The UK and Canada have higher exposures to energy and mineral extraction companies as a share of their respective indices and so have a lower environmental score.

Canada and emerging markets demonstrate a higher carbon intensity score relative to other equity markets. A higher carbon intensity signifies lower carbon efficiency, or more CO₂ being produced per million dollars of sales. Japanese equities score well on environmental issues and exhibit the lowest carbon intensity globally, despite industrials (20%) accounting for the largest sector exposure on a market capitalisation weighted basis.

Source – MSCI ESG Manager

Looking at the social score across geographies, most regions hover between a score of 4 and 5, with Europe and Nordic equities leading. Interestingly, emerging markets score slightly better than the United States in their exposure to holdings’ ability to better manage exposures to key social risks and opportunities.

Source – MSCI ESG Manager

In privacy and data security however, emerging market equities score lower. Information Technology and Communication Services companies account for close to 30% of broad emerging markets equity exposure (MSCI Emerging Markets Index), where these companies are in a transition process of adopting privacy policies and internal data security controls that are on par with global leaders in developed nations.

Source – MSCI ESG Manager

On governance, Nordic equities lead again, with a higher exposure to companies well-positioned to manage exposure to key governance risks and opportunities. The UK ranks third behind Canada, but slightly ahead of Europe. If we look deeper into intra-issue scores, further disparities appear, particularly in gender diversity.

Source – MSCI ESG Manager

When it comes to board gender diversity, the Nordic equity market leads the world, where over 80% of companies exhibit female board representation at over 30%. Europe and the UK are not too far behind, and they’re ahead of the United States at over 60%. Japan and emerging markets score very poorly in this regard, indicating most companies do not have many females at a board level. Japan in particular has a low female labour participation rate that has historically been less than 50%and this translates to companies at a senior management level. The Nordic nations on average have a female labour force participation rate in excess of 60%. The United States interestingly also has a rather low score, at less than 30% of companies with more than 30% female board representation.

Source – MSCI ESG Manager

Finally, we look at the regions on an overall basis, through the overall environmental, social and governance score. This is the overall ESG score, measuring the aggregate ability of the underlying companies to manage key risks and opportunities arising from environmental, social and governance factors. Once again, the Nordic and European equity markets lead the world with the UK coming in third. MSCI ACWI is pushed lower due to its high allocation to the United States, with Japan, the US and Emerging Markets coming in last.

Source – MSCI ESG Manager

It’s important to be aware that while our socially responsible portfolios have a global focus, they don’t have an explicit objective to maximise their ESG scores. We don’t build these portfolios by attempting to achieve the highest possible score. Rather, we aim to deliver a good improvement in ESG scoring while still ensuring that the portfolio is well-diversified and holds the mix of assets that we believe will deliver the best returns adjusted for risk. You can read much more about our approach to socially responsible investing in our white paper.


  1. MSCI Index Data
  2. MSCI Index Data
  3. Japan Statistics Bureau – Labour Force Survey, 2019
  4. IMF – Labour Force Participation Rate

Risk warning

As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest.