The Role of ESG Evaluation & Resources for Successful ESG Practices
Hosted by Rosemary Lapka of the GSC and Devon Reichelt of Refinitiv
The following is a summary of the attached video examining what the existing ESG data is telling us about successful supply chain policies & practices and how the role of ESG Evaluation & Resources for Successful ESG Practices is evolving. It is hosted by Rosemary Lapka of the GSC and Devon Reichelt, Lead Market Specialist for Lipper and ESG at Refinitiv, which was formerly known as the Financial and Risk business of Thomson Reuters. Devon works on a consultative basis with some of the world’s largest asset managers and banks to assist them in understanding capital flows, performance comparables, fee and expense rational, ESG investing, and market sentiment.
Supply chains often make up the majority of a company’s impact on society and the planet. Companies can begin to evaluate and improve the performance of their supply chains through examining ESG factors of their business. For both financial and market-driven reasons, companies are asking the following questions of themselves and their industries:
- What resources are available for incorporating ESG evaluations into supply chain activity?
- How do companies start to design policies that become best practices for responsible supply chains?
- How does the market evaluate responsible ESG practices?
- Is there now or will there be a single global set of ESG metrics to evaluate this data?
The answer to that last question is no, there is currently no standardized format. Which is why the work at Refinitiv is so critical. It assembles the data, analyzes the information, and has developed a structured, weighted format with specific criteria so companies can be compared to each other in a unified set of standards defining their performance on an ESG basis. This information impacts mutual and pension fund managers who are trying to weed out and guard against investing in any companies that are associated with undesirable business practices such as excessive water use, unfair labor practices, the use of child labor, board and gender equality issues, or any other policy that could be considered detrimental from a social and corporate governance perspective, negatively impacting the performance of their portfolio. Building that value chain progressed from simply avoiding those companies to seeking out businesses with ESG-friendly products and procedures who were determining what best-practices were in each field, to recognizing that implementing those best-practices led to higher market share and corporate value and were therefore the best investments for their portfolios. We now have companies trying to understand what their peers are doing from an ESG perspective to make sure that they are best-in-class.
Refinitiv uses at least 178 comparable measures and over 400 different metrics to develop their comprehensive ESG database, which impacts how the global financial community measures ESG performance. They source data from an ESG content perspective from multiple providers. Some analytical groups are provided information directly from corporations and some scour reports and online sources using artificial intelligence. But since Refinitiv wants to note the exact resource that has provided that data and reference it, map back to it, they use information that is publicly available; no private information is used. They manually process information on over 7,000 public companies using annual CSR reports, data provided on company websites, NGO websites, exchange filings, and publicly available news sources. This is then converted into standardized set of data points noting everything from the measured output of CO2 emissions and water usage to “true or false” values recording who has policies on HIV/AIDS, increasing the percentage of women managers, to methods of responsible sourcing. If vendors make note of how or what a company is doing, both positively or negatively, they will also input that data which can then be authenticated or refuted by the company by clicking on that datapoint in the source document. This unique way of collecting information allows them to audit this information like a financial statement supporting a more holistic due diligence.
Knowing what and how other companies are reporting this type of ESG information will help standardize and guide what goes into CSR reports and improve data analysis. For instance, if you have a water reduction policy but don’t note it in your CSR report, it will likely not be calculated into your overall score. And that means that it’s likely that your stakeholders, your customers and your industry don’t know about your conservation and efficiency efforts. And that can hurt your standing in the market.
The video continues to provide more information on
- How Refinitiv’s data analysis and model works
- Scoring methodology and categories
- Controversies within the categories
- How to use those scores to improve individual company performance and public perception
- ESG Global Coverage
- Seeing the actual platform in use