Are we all ESG investors now?

It is a minefield, agreed Adam Robbins, a senior investor relationship manager for Triodos bank. "Not only for retail investors but also for those of us in the industry. The data providers who measure and produce indices are very inconsistent and there is no single overview that encapsulates everything.

"In our view, ESG is very much the bare minimum here. It is possible for companies to tick many boxes on the ESG scoring system but it doesn't mean they are having a positive net impact", he said. 

Their concerns were highlighted by research from ESG data analyst Truvalue, which showed ESG data comes in many different shapes and sizes:

  • ESG Ratings
  • ESG Metrics
  • ESG Controversies
  • ESG News

While TruValue was not able to participate in the panel discussion, due to time zone differences, Eli Reisman, director or product management for Truvalue Labs, offered this comment: "When investors are trying to figure out what the data means to them, it is important for ESG investors to consider the source used to mine the data and the methodology used to interpret the data.

"Most traditional ESG data providers source their data from company disclosed information such as annual Sustainability Reports or CSR Reports. These providers take the available data and then put their own methodology and analysis on top of the metrics to create ratings."

However, in the cases where companies do not disclose any ESG data, such as the 40 per cent of Russell 1000 companies that do not issue ESG data, providers create methodologies to fill in data using industry averages or other stand-in metrics.

Mr Reisman added: "With this in mind investors need to ask themselves if they are comfortable with only using company self-disclosed information in their analysis?"

Mr Parker agreed that benchmarks could be a "blunt tool" and that some of the data out there could send investors down a rabbit hole, but said it was important to work with them to help "move the dial". 

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