Preqin ESG Solutions 34 Modifying industry risk with geography ESG Risk Having obtained 54 Industry Risk Scores and 221 Geography Risk Scores, we combine these two datasets to generate Exposure Risk Exposure Estimates. The measure of risk inherent to a given industry is adjusted by up to ±50% to account for the Estimate regulatory, economic, and physical environment – as de昀椀ned by the location of the company’s headquarters. We calculate it using these formulas: Risk Exposure Estimate= f(Industry  Risk Score ×[1+ Geography Risk Modi昀椀er])  Geography Risk Modi昀椀er = Geography Risk Score- 5.0 10.0 Function f(x)=max(0.0,min(x,10.0) ) guarantees that the Risk Exposure Estimate is between 0.0 and 10.0. The Geography Risk Modi昀椀er is typically moderate. For 70% of all the combinations of a country and an industry, the di昀昀erence between the baseline Industry Risk Score and the 昀椀nal Risk Exposure Score is between –1.0 and +1.0. This framework enables us to obtain a proxy of ESG risk exposure for every company in each portfolio. As a result, we can aggregate risk exposure scores associated with individual deals to fund level and fund manager 昀椀rm level. ↗ Back to Contents