How to Combine ESG Scores and Financial Quality in a Peer-Relative Institutional Screen

ESG scores and financial-quality metrics answer different questions. A company may rank well on environmental, social, and governance measures while producing weaker margins, carrying more leverage, or converting less revenue into free cash flow. Another company may show strong financial performance but rank lower on ESG factors than its closest peers.

Looking at only one side can leave an important part of the picture out. An ESG-only comparison can overlook weak operating economics, while a financial-quality screen says little about differences in environmental performance, social practices, or governance. The two views become more useful when analysts evaluate them separately and then compare the results.

This screen is designed for that purpose. It ranks a fixed peer group on composite and pillar-level ESG scores, then ranks the same companies on return on invested capital, operating margin, net debt to EBITDA, and free cash flow margin. The final classification shows whether the two dimensions reinforce each other or point in different directions.

The analysis does not test whether stronger ESG ratings lead to higher investment returns. That is a different question, which requires comparing ESG scores with subsequent stock performance. Here, the purpose is narrower: to create a transparent research screen that helps analysts decide where to look next.

The worked example compares NVIDIA, Intel, Broadcom, and Texas Instruments using a July 31, 2026 cutoff. The classifications apply only to this four-company sample. Portfolio teams would still need to apply their own ESG thresholds, exclusions, risk limits, valuation criteria, and portfolio-construction rules.

Key Takeaways

• Evaluate ESG and financial quality separately before comparing how the two dimensions align.
• Use the composite ESG score for the primary ranking and retain environmental, social, and governance scores to explain what sits beneath it.
• Compare financial quality across capital efficiency, profitability, leverage, and cash generation rather than relying on a single ratio.
• Keep classifications relative to the selected peer group. An upper-half position is not the same as mandate eligibility.
• Flag large gaps between the composite ESG score and the governance score for further review, but set the threshold according to the research team's own policy.
• Preserve the underlying values, dates, ranks, and calculations so analysts can trace every final classification.

Build the Two-Part Screening Model

The model evaluates ESG positioning and financial quality as two separate peer-relative dimensions. It combines them only after both rankings are complete.

The example uses a fixed group of four semiconductor companies:

• NVIDIA (NVDA)
• Intel (INTC)
• Broadcom (AVGO)
• Texas Instruments (TXN)

The July 31, 2026 cutoff determines which records can enter the screen. The ESG side uses the latest complete company record dated on or before that cutoff. The financial side uses each company's latest completed annual fiscal period available by the same date. Quarterly and trailing-twelve-month financial metrics are excluded to keep the financial comparison on a consistent annual basis.

Rank the ESG Evidence

The ESG layer uses four values from the same company record:

• ESG composite score
• Environmental score
• Social score
• Governance score

Companies are ranked from highest to lowest on the composite score. With four companies, ranks 1 and 2 form the ESG Upper Half, while ranks 3 and 4 form the ESG Lower Half.

If two composite scores are equal, the company with the higher governance score ranks first. If the governance scores are also equal, ticker symbol provides the final alphabetical tie-breaker. When a required composite score is unavailable, the model keeps the peer group fixed and reports Review required rather than removing the company and changing the comparison universe.

The pillar scores remain visible in the output because similar composite scores can reflect different underlying profiles. A company may rank well overall while still showing a weaker governance or environmental result that warrants a closer look.

Measure Financial Quality

The financial-quality layer compares four metrics across capital efficiency, profitability, leverage, and cash generation.

Financial-quality factor	Metric	Stronger direction
Capital efficiency	Return on invested capital	Higher
Profitability	Operating margin	Higher
Leverage	Net debt to EBITDA	Lower
Cash generation	Free cash flow margin	Higher

Return on invested capital measures the operating return generated from the capital committed to the business. It is most useful when analysts apply a consistent definition and compare ROIC with the company's cost of capital rather than reading the ratio in isolation.

Operating margin and free cash flow margin are calculated from annual statement values:

Operating Margin = Operating Income / Revenue x 100

Free Cash Flow Margin = Free Cash Flow / Revenue x 100

Revenue, operating income, and free cash flow must correspond to the same completed annual fiscal period. Net debt to EBITDA uses the annual value returned by FMP. A negative value can remain in the comparison when EBITDA is positive and the company has net cash, since lower leverage ranks more strongly in this model.

If EBITDA is zero or negative, net debt to EBITDA is reported as Not meaningful. The company's financial classification then becomes Review required rather than receiving a forced rank.

Calculate the Financial-Quality Rank

Each valid financial metric receives a rank from 1 to 4. Higher ROIC, operating margin, and free cash flow margin rank more strongly. Lower net debt to EBITDA ranks more strongly.

The four metric ranks are averaged:

Financial Quality Rank Score = (ROIC Rank + Operating Margin Rank + Net Debt-to-EBITDA Rank + Free Cash Flow Margin Rank) / 4

A lower score indicates stronger financial quality relative to the selected peers. Companies are sorted from the lowest score to the highest and assigned positions 1 through 4. Positions 1 and 2 form the Financial Upper Half, while positions 3 and 4 form the Financial Lower Half.

If two companies have the same Financial Quality Rank Score, higher ROIC is the first tie-breaker, followed by higher free cash flow margin and then ticker symbol alphabetically. A company with a missing required metric receives Review required rather than an estimated value.

Combine the Two Rankings

Once both rankings are complete, the model combines them into a simple research classification.

ESG position	Financial position	Combined classification
ESG Upper Half	Financial Upper Half	Stronger on both screens
ESG Upper Half	Financial Lower Half	Stronger ESG / weaker financial quality
ESG Lower Half	Financial Upper Half	Stronger financial quality / weaker ESG
ESG Lower Half	Financial Lower Half	Weaker on both screens
Either ranking cannot be supported	Review required	Review required

These classifications describe relative position within the selected sample. They are useful for prioritizing research, but they do not determine whether a company meets an institution's ESG mandate or belongs in a portfolio.

Check for Governance Divergence

A composite ESG score can conceal a weaker individual pillar. The model therefore includes a separate governance-gap calculation:

Governance Gap = ESG Composite Score - Governance Score

In this example, a gap of 15 points or more triggers a Yes flag. A smaller gap receives No, and a missing composite or governance score receives Review required. The 15-point cutoff is an illustrative review threshold, not an industry standard. A research team can replace it with a threshold that reflects its own governance policy and materiality rules.

A negative gap means the governance score is higher than the composite score and does not trigger the flag. The flag also does not change the company's ESG rank or combined classification automatically. It identifies an area that may deserve separate review.

Map Each FMP Dataset to a Specific Task

The screen uses four FMP datasets. Each has a defined role, which keeps the calculations easier to trace and limits unnecessary data retrieval.

FMP data input	Role in the screen	Fields used
ESG Ratings	Retrieve the latest complete company ESG record by the cutoff	Record date, ESG composite, environmental, social, and governance scores
Key Metrics	Supply annual capital-efficiency and leverage measures	Date, fiscal year, period, return on invested capital, net debt to EBITDA
Income Statement	Supply annual revenue and operating income	Date, accepted date when returned, fiscal year, period, revenue, operating income, EBITDA
Cash Flow Statement	Supply annual free cash flow	Date, accepted date when returned, fiscal year, period, free cash flow

The ESG Ratings API supplies the composite and pillar scores used in the ESG ranking. All four scores must come from the same record. The screen does not convert them into absolute mandate thresholds.

The Key Metrics API supplies annual return on invested capital and net debt to EBITDA. The Income Statement API provides revenue and operating income for the margin calculation, while the Cash Flow Statement API provides free cash flow.

For each company, the fiscal year and annual period must align across the financial inputs. Statement dates and availability information should remain in the output when returned. The screen does not require the ESG Benchmark Comparison API because the peer group is fixed in advance and ranked directly. It also does not require a separate Financial Ratios API because operating margin and free cash flow margin are calculated from statement values.

Connect FMP to Claude Through MCP

An active FMP API key and a Claude account that supports custom connectors are required. FMP's MCP connection instructions use the following remote server URL:

https://financialmodelingprep.com/mcp?apikey=YOUR_FMP_API_KEY

Replace YOUR_FMP_API_KEY with your key. In Claude, open Settings, select Connectors, choose Add custom connector, and paste the URL into the Remote MCP Server URL field. After the connection is saved, Claude can access the FMP tools exposed through the server.

The prompt below keeps the universe fixed, limits retrieval to the required datasets, defines every ranking rule in advance, and specifies how to handle missing or non-meaningful values.

Run the Peer-Relative Screen in Claude

Use Financial Modeling Prep data through the connected FMP MCP server to run an illustrative peer-relative ESG and financial-quality screen.

This is a research screen, not an institutional mandate test, portfolio recommendation, or investment-eligibility model.

RUN CUTOFF

July 31, 2026

FIXED PEER SAMPLE

- NVIDIA (NVDA)

- Intel (INTC)

- Broadcom (AVGO)

- Texas Instruments (TXN)

Do not add, remove, replace, or search for other companies.

Use FMP MCP only. Retrieve only the records and fields required below. Batch requests by dataset when the connected tool supports it.

Do not use TTM or quarterly financial metrics, external ESG data, stock returns, valuation data, news, analyst estimates, portfolio weights, ESG Benchmark data, or company-profile screening.

The result measures relative position only within these four companies. It does not establish whether a company satisfies an ESG mandate or qualifies for portfolio inclusion.

1. ESG EVIDENCE

For each company, use the latest complete FMP ESG Ratings record dated on or before July 31, 2026.

Retrieve the record date, ESGScore, environmentalScore, socialScore, and governanceScore from one record. Use the actual field names returned by the connected FMP tool when semantically equivalent names appear. Do not invent or reconstruct an ESG score, and do not combine scores from different records.

Rank ESGScore from highest to lowest using unrounded values:

- ESG rank 1 = highest

- ESG rank 4 = lowest

If exact ESGScore values tie, use the higher governanceScore and then ticker alphabetically.

Assign:

- ESG Upper Half: ranks 1-2

- ESG Lower Half: ranks 3-4

If a required ESGScore is unavailable, preserve the available evidence and mark the ESG classification Review required. Do not shrink the peer universe.

2. GOVERNANCE DIVERGENCE

For each company with valid ESGScore and governanceScore values, calculate:

Governance Gap = ESGScore - governanceScore

Apply this illustrative review flag:

- Yes: Governance Gap is at least 15 points

- No: Governance Gap is below 15 points

- Review required: either score is unavailable

The 15-point cutoff is adjustable. Do not describe it as an institutional governance standard, validated risk threshold, or mandate rule. A negative gap receives a No flag.

3. FINANCIAL-QUALITY EVIDENCE

For each company, use the latest completed annual fiscal period available on or before July 31, 2026. Use annual FY records only and keep the same fiscal year and annual period across the financial datasets for each company.

KEY METRICS

- date

- fiscalYear

- period

- returnOnInvestedCapital

- netDebtToEBITDA

INCOME STATEMENT

- date

- acceptedDate when returned

- fiscalYear

- period

- revenue

- operatingIncome

- EBITDA

CASH FLOW STATEMENT

- date

- acceptedDate when returned

- fiscalYear

- period

- freeCashFlow

Where availability metadata is returned, confirm that the record was available by July 31, 2026. If the required records do not align to one annual fiscal period, mark the financial-quality result Review required.

Calculate:

Operating Margin = Operating Income / Revenue x 100

Free Cash Flow Margin = Free Cash Flow / Revenue x 100

Use FMP returnOnInvestedCapital for ROIC and FMP netDebtToEBITDA directly.

Preserve a negative netDebtToEBITDA value when EBITDA is positive and the company has net cash. If EBITDA is zero or negative, report netDebtToEBITDA as Not meaningful and mark the financial-quality result Review required.

Do not calculate missing ROIC, netDebtToEBITDA, or free cash flow from alternative datasets.

4. FINANCIAL-QUALITY RANKING

Rank all four companies on each valid metric using unrounded values:

- ROIC: higher is stronger

- Operating Margin: higher is stronger

- Net Debt to EBITDA: lower is stronger

- Free Cash Flow Margin: higher is stronger

Assign ranks 1 through 4. For an exact individual-metric tie, use ticker alphabetically.

For every company with four valid metric ranks, calculate:

Financial Quality Rank Score = (ROIC Rank + Operating Margin Rank + Net Debt-to-EBITDA Rank + Free Cash Flow Margin Rank) / 4

Lower scores represent stronger peer-relative financial quality.

Sort from the lowest Financial Quality Rank Score to the highest and assign Financial Position 1 through 4. If scores tie, use higher ROIC, then higher Free Cash Flow Margin, then ticker alphabetically.

Assign:

- Financial Upper Half: positions 1-2

- Financial Lower Half: positions 3-4

If a required metric prevents completion of the fixed four-company ranking, do not estimate it. Mark the affected financial-quality classification Review required.

5. COMBINE THE SCREENS

Apply these peer-relative labels:

- ESG Upper Half + Financial Upper Half = Stronger on both screens

- ESG Upper Half + Financial Lower Half = Stronger ESG / weaker financial quality

- ESG Lower Half + Financial Upper Half = Stronger financial quality / weaker ESG

- ESG Lower Half + Financial Lower Half = Weaker on both screens

- If either screen is Review required = Review required

Do not use ESG Eligible, Below mandate, Dual-qualified, Pass, Fail, Mandate compliant, or Portfolio eligible.

6. EVIDENCE STATUS

Use only:

- Complete: all inputs required for the reported classifications are present and period-consistent

- Review required: a required input, period match, rank, or classification cannot be supported

This is an evidence-completeness label, not a statistical confidence score.

REQUIRED OUTPUT

Produce exactly five compact tables, each with four company rows.

TABLE 1 - ESG SCORES

Columns: Company, Ticker, ESG record date, ESG composite, Environmental, Social, Governance

TABLE 2 - ESG CLASSIFICATION

Columns: Company, ESG rank, Peer-relative ESG band, Governance gap, Governance flag

TABLE 3 - ANNUAL FINANCIAL RECORDS

Columns: Company, Fiscal year, Period end, Statement availability date if returned, Revenue, Free cash flow

TABLE 4 - FINANCIAL-QUALITY RANKING

Columns: Company, ROIC and rank, Operating margin and rank, Net debt / EBITDA and rank, FCF margin and rank, Financial Quality Rank Score, Financial position, Peer-relative financial band

TABLE 5 - COMBINED SCREEN

Columns: Company, ESG band, Financial band, Combined classification, Governance flag, Evidence status

ROUNDING

- ESG scores and Governance Gap: 2 decimals

- ROIC, Operating Margin, and FCF Margin: 2 decimals

- Net Debt / EBITDA: 2 decimals

- Financial Quality Rank Score: 2 decimals

- Revenue and Free Cash Flow: one consistent USD unit

Use Unavailable for missing raw data, Not meaningful only when a ratio cannot be interpreted, and Review required when a required ranking or classification cannot be supported. Never replace a missing value with zero.

After Table 5, provide one concise analyst follow-up for each company as four bullets. Do not recommend buying, selling, including, excluding, increasing, or reducing any company. Do not claim that stronger ESG causes stronger financial performance. Then stop.

Results From the Four-Company Screen

The July 31, 2026 demonstration produced complete ESG and annual financial records for all four companies. The tables below retain the dates and values needed to follow the rankings.

ESG Scores

Company	Ticker	ESG record date	ESG composite	Environmental	Social	Governance
Intel	INTC	Jun. 27, 2026	78.17	77.56	77.09	79.84
Texas Instruments	TXN	Jun. 30, 2026	72.90	74.26	75.60	68.85
NVIDIA	NVDA	Apr. 26, 2026	70.25	72.97	66.64	71.15
Broadcom	AVGO	May 3, 2026	54.32	52.58	48.92	61.46

ESG Classification

Company	ESG rank	Peer-relative band	Governance gap	Governance flag
Intel	1	ESG Upper Half	-1.67	No
Texas Instruments	2	ESG Upper Half	4.05	No
NVIDIA	3	ESG Lower Half	-0.90	No
Broadcom	4	ESG Lower Half	-7.14	No

Intel ranks first on composite ESG score in this sample, followed by Texas Instruments. NVIDIA and Broadcom occupy the lower half. That placement is comparative rather than absolute. NVIDIA's 70.25 composite score, for example, receives an ESG Lower Half label because it ranks third among these four companies, not because it fails an external ESG standard.

No company triggers the 15-point governance flag. Texas Instruments has the largest positive gap at 4.05 points. A No flag means that the governance score is not materially below the composite score under this rule. It does not rule out other governance concerns.

Annual Financial Records

Company	Fiscal year	Period end	Statement availability	Revenue ($M)	Free cash flow ($M)
NVIDIA	FY2026	Jan. 25, 2026	Feb. 25, 2026	215,938	96,676
Broadcom	FY2025	Nov. 2, 2025	Dec. 18, 2025	63,887	26,914
Texas Instruments	FY2025	Dec. 31, 2025	Feb. 6, 2026	17,682	2,603
Intel	FY2025	Dec. 27, 2025	Jan. 22, 2026	52,853	-4,949

Financial-Quality Ranking

Company	ROIC (rank)	Operating margin (rank)	Net debt / EBITDA (rank)	FCF margin (rank)	Rank score / position	Financial band
NVIDIA	62.88% (1)	60.38% (1)	0.01x (1)	44.77% (1)	1.00 / 1	Financial Upper Half
Broadcom	16.36% (3)	39.89% (2)	1.41x (2)	42.13% (2)	2.25 / 2	Financial Upper Half
Texas Instruments	16.46% (2)	34.06% (3)	1.47x (3)	14.72% (3)	2.75 / 3	Financial Lower Half
Intel	0.00% (4)	-0.04% (4)	2.25x (4)	-9.36% (4)	4.00 / 4	Financial Lower Half

NVIDIA ranks first on all four financial measures and receives a Financial Quality Rank Score of 1.00. Broadcom ranks second overall. Texas Instruments places third, while Intel ranks fourth on each metric in this sample.

The result is useful as a comparison, but the underlying business context still matters. Intel's negative free cash flow and Texas Instruments' lower free cash flow margin may reflect investment cycles as well as operating performance. Broadcom's acquisition history and NVIDIA's asset-light business model also affect how their margins, leverage, and returns compare with manufacturers that own more fabrication capacity.

Combined Peer-Relative Screen

Company	ESG band	Financial band	Combined classification	Governance flag	Evidence status
NVIDIA	ESG Lower Half	Financial Upper Half	Stronger financial quality / weaker ESG	No	Complete
Intel	ESG Upper Half	Financial Lower Half	Stronger ESG / weaker financial quality	No	Complete
Broadcom	ESG Lower Half	Financial Upper Half	Stronger financial quality / weaker ESG	No	Complete
Texas Instruments	ESG Upper Half	Financial Lower Half	Stronger ESG / weaker financial quality	No	Complete

The screen points to a specific follow-up for each company:

• NVIDIA: Review the environmental and social factors behind the lower peer-relative ESG position.
• Intel: Determine whether weak profitability and free cash flow mainly reflect the current investment cycle.
• Broadcom: Examine the environmental and social pillars contributing to the lower ESG rank.
• Texas Instruments: Assess whether lower free cash flow reflects a temporary capital-spending cycle.

No company ranks in the upper half on both dimensions. NVIDIA and Broadcom rank more strongly on financial quality, while Intel and Texas Instruments rank more strongly on ESG. The split is the main analytical result: the companies leading one screen are not the same companies leading the other.

That contrast gives analysts a clearer research path. NVIDIA and Broadcom warrant closer review of the ESG pillars driving their lower relative positions. Intel and Texas Instruments warrant more attention to the durability of margins, cash generation, and capital efficiency. Neither side of the screen overrides the other.

Where Analyst Judgment Still Matters

The ranking rules make the comparison consistent, but they cannot resolve every difference among the companies. Four areas deserve particular attention before the results inform a broader portfolio process.

ESG Records Are Not Perfectly Synchronized

The ESG records range from April 26 to June 30, 2026. Every record falls before the July 31 cutoff, but the scores do not represent the same observation date.

Analysts should consider whether controversies, regulatory developments, ownership changes, or other material events occurred between each record date and the screen cutoff. Teams that require continuous monitoring can extend the process into an ESG dashboard that tracks portfolio risks over time.

Annual Reporting Calendars Differ

NVIDIA's latest annual period ends in January 2026, while the other companies' fiscal years end in late 2025. Using the latest completed annual period keeps each company's inputs consistent within that company, but it does not create a perfectly synchronized economic snapshot.

Demand, pricing, acquisitions, financing, or capital spending may have changed after a company's fiscal year-end. The results should therefore be read as a comparison of the latest available annual periods, not as a same-day financial snapshot.

Capital Spending Can Distort Free Cash Flow Comparisons

Free cash flow can fall during a large investment program even when the underlying business remains sound. That matters in semiconductors, where fabrication capacity, data-center infrastructure, equipment, and other capital requirements differ substantially across business models.

Intel's negative free cash flow margin and Texas Instruments' lower margin deserve further analysis rather than an automatic structural judgment. Analysts should distinguish temporary investment intensity from a persistent inability to convert operating performance into cash. Understanding why cash flow can diverge from reported earnings helps frame that review.

Peer Selection Can Change the Bands

With only four companies, the upper-half boundary depends directly on the selected universe. The ESG cutoff falls between Texas Instruments at 72.90 and NVIDIA at 70.25, a difference of 2.65 points. The financial cutoff falls between Broadcom at 2.25 and Texas Instruments at 2.75.

Adding or replacing a company could change those bands even if none of the underlying metrics moved. That does not make the screen unusable, but it makes peer selection part of the methodology rather than a background assumption.

A Governance Flag Is Only a Starting Point

The governance-gap rule tests whether the governance pillar sits materially below the composite score. It does not evaluate board oversight, shareholder rights, ownership concentration, executive incentives, related-party transactions, controversies, or disclosure quality.

Those questions require a dedicated review. A separate workflow for measuring governance risk across global equities can add that depth when governance is central to the mandate.

Use the Screen to Prioritize the Next Research Question

The value of the model comes from keeping ESG and financial quality separate long enough to see where they agree and where they conflict. A single blended score could hide that distinction. The two-part classification keeps the underlying evidence visible and directs attention to the weaker side of each company's profile.

For NVIDIA and Broadcom, the next question sits primarily in the ESG pillars. For Intel and Texas Instruments, it sits in profitability, capital efficiency, and cash generation. Portfolio teams can then add their own absolute ESG thresholds, exclusions, valuation criteria, liquidity requirements, and concentration limits before making an eligibility or investment decision.

Used this way, the screen is not a final answer. It is a disciplined way to decide which question should come next.