ESG has become an unstoppable force in the global investment industry, driven by the influence of millennials, regulation and the need to find new data sources to help generate alpha. How are ESG data tools from Refinitiv helping investors to compare and analyze sustainable performance?
- At Refinitiv, our ESG data covers 76 countries; 70% of global market cap; 400+ ESG metrics; 1.2 million mission officers and directors; 513,000 individual fixed income securities, and 6,500+ equity issues.
- Factors driving the adoption of ESG data tools include the enthusiasm of millennials, greater regulation and stronger links to alpha generation.
- Our goal at Refinitiv is to make ESG data readily consumable, through our strategic desktop Eikon, or through APIs, indices, company scores or fund ratings.
The rate at which the investment industry and corporate world has adopted Environmental, Social & Governance (ESG) principles in recent years is astonishing.
However, without clear and consistent definitions, without systems for rating and scoring, and ultimately without data to compare and analyze, the best intentions can end up being little more than PR.
This will allow investors to objectively assess the different environmental, social and governance performances of companies, and allocate capital accordingly.
In the process, companies will be rewarded for good behavior and value creation, on behalf of both shareholders and society. This in turn will precipitate a virtuous circle of responsible behavior.
ESG data tools and insight
In other words, the ESG revolution is not dependent on the universe of financial professionals adopting a new value system overnight, in which they care more tomorrow than they do today about externalities — whether it is climate change, resource consumption, diversity and inclusion, or the fair treatment of workers, to name but a few.
Instead, the transparency afforded by our ESG data tools and insight will allow ESG factors to be seamlessly integrated with their current workflows, in a way that makes them an integral feature in the capital allocation process.
Indeed, managers who proactively adopt such ESG data tools will be swimming with an ineluctable tide, driven by several factors.
First, we are witnessing the advent of ESG-related regulation at EU level, a world-first and surely not the last effort to integrate responsible practices into hard letter regulation.
Second, we are seeing a cultural and societal shift whereby millennials place a much greater value on products, services and brands that have an ostensible ‘purpose’.
And third, if others are using ESG to establish better links to alpha generation and identifying companies with better long-term sustainable growth strategies, then those that don’t do this will be at a disadvantage.
I believe we are just at the start of what will prove to be a major theme for the global investment industry, and I am proud that Refinitiv, through our newly established Sustainable Investing & Fund Ratings business, is able to provide a user-friendly and dynamic empirical grounding for this positive movement.