La Tofi ESG Rating
LA TOFI
Four Key Pillars
Managing local risks, sparking hope for the world
La Tofi ESG Rating offers a Risk–Action Alignment approach built upon four key pillars. This approach places local realities as a critical factor in assessment, making the results more relevant and applicable across diverse regional contexts.
Local Risk Mapping Index (LRMI)
Measures the accuracy of risk mapping specific to local contexts.
Risk–Strategy Alignment Index (RSAI)
Assesses how well strategies align with the actual level of risk.
Action Mitigation Score (AMS)
Evaluates the scale, effectiveness, and sustainability of mitigation actions.
Field Verification Score (FVS)
Ensures the validity of data and impact evidence through on-site verification.
“Risk–Action Alignment is the core concept of the La Tofi ESG Rating. It emphasizes the balance between the actual risks faced and the actions taken by an entity.”
Comparison
Sustainalytics vs. MSCI vs. La Tofi
Dimension | Sustainalytics ESG Risk Rating | MSCI ESG Rating | La Tofi ESG Rating |
Core Philosophy | Measures residual material ESG risks: Exposure – Management. | Assesses whether a company is a leader, average, or laggard in managing ESG risks relative to its industry peers. | Measures the proportionality of Risk–Action Alignment based on local context & field verification. |
Scoring Scale | Numerical score 0–100 (lower is better). Categories: Negligible (0–10), Low (10–20), Medium (20–30), High (30–40), Severe (40+). | Letter grades: AAA (leader) – CCC (laggard). | Numerical score 0–100 (higher is better). Categories: Platinum (85–100), Gold (70–84), Silver (55–69), Bronze (0–54). |
E–S–G Approach | ESG weighted by sector materiality (different weights per industry). | Industry-based ESG materiality → risk factors vary by sector (e.g., emissions for utilities, data privacy for banks). | ESG based on 4 pillars: LRMI (20%), RSAI (25%), AMS (35%), FVS (20%). |
Environmental (E) | GHG emissions, water, waste, biodiversity (sector-specific risks). | Emissions, water, energy, biodiversity (relative to industry peers). | CO₂ emissions, air pollution, FABA, waste, land rehabilitation (survival rate), tidal flood risks. |
Social (S) | Labor rights, OHS, supply chain, product, community. | Workforce, supply chain, products, healthcare access, indigenous rights. | Workers (OHS, training), local MSMEs, poverty, crime, prostitution, substandard housing. |
Governance (G) | Board structure, anti-corruption, taxation, business ethics. | Board structure, anti-corruption, taxation, anti-monopoly, ownership. | ESG transparency, permit compliance, anti-corruption, risk integration into Corporate Risk Register, field audit. |
Assessment Methodology | – ESG risk exposure per sector. – Management capacity. – Residual risk score. | – Compares companies with global industry peers. – Adjusted by industry risk exposure. | – LRMI: local risk mapping. – RSAI: risk–strategy integration. – AMS: mitigation effectiveness. – FVS: field verification. |
Field Validation | None, based on documents & public media. | None, based on public data & reports. | Mandatory → Field Verification Score (FVS). |
Output | ESG risk score (for investor screening). | AAA–CCC rating, used in MSCI ESG Leaders Index. | ESG Rating Certificate (Platinum–Bronze) + narrative improvement report. |
Target Users | Global investors, asset managers, multinational companies. | Global investors, market indices, global corporations. | Indonesian companies (listed/non-listed), SOEs, MSMEs, local governments. |
Key Strengths | – Numerical scores easily used by investors. – Focus on residual risks. | – Relative ratings make peer comparison easy. – Used in global indices. | – Indonesian local context (unique socio-environmental risks). – Field verification included. – More inclusive (MSMEs & local governments). |
Key Weaknesses | Does not account for local context, no field validation. | Focuses on industry comparison, lacks local detail. | Not global yet; not an international benchmarking standard. |
Key Takeaways
- Sustainalytics → focuses on residual ESG risks (used by investors for risk screening).
- MSCI → focuses on a company’s relative position to global industry peers (used in ESG stock indices).
- La Tofi ESG Rating → focuses on Indonesia’s local relevance, community engagement, and field-verified actions.
For companies in Indonesia, the ideal approach is a combination:
- Use MSCI/Sustainalytics for international credibility & global investor access.
- Use La Tofi ESG Rating to build local credibility, strengthen relations with local governments, regulators, communities, and the domestic market.
The Future of La Tofi ESG Rating
As an Instrument for the Earth’s Recovery
- Platform Digitalization: online self-assessment and monitoring.
- Global Standards Integration: GRI, SASB, ISSB, synergized with local data.
- Strategic Sector Expansion: renewable energy, food, education, and public governance.
- Earth Recovery Instrument: making every ESG action commensurate with the global crisis at hand.
- Field Verification Starting in 2026: generating recommendations for rating improvement strategies.
Benefits for Companies and Stakeholders
- Global Investors: Access to sustainable capital.
- Regulators & OJK: Support for ESG compliance.
- Communities: Real impact, not just reports.
- Companies: Global reputation, public recognition, and a roadmap to Platinum.
- Measurable Ratings & Scores: Every company will receive clear ESG ratings and scores.
- Practical Improvement Suggestions: Immediate recommendations to improve ratings based on risk proportionality and mitigation actions.