ESG data and disclosure: A new tool for issuers
The number and scale of investors demanding greater disclosure of ESG-related data and integrating ESG into their capital allocation decision-making continues to gather pace around the world.
The BlackRock Global Client Sustainable Investing Survey indicates that investors plan to double their ESG assets under management by 2025, suggesting that this marks the start of ‘a sustained shift for at least the next five years’.
For many investors there is a growing conviction that ESG and stronger returns are two sides of the same coin: in another recent survey, nearly two thirds of institutional investors say they believe alpha is to be found in ESG assets.
Sustainable funds attracted all-time-high inflows of €120 bn ($142 bn) in the first quarter of 2021, representing more than half of overall European fund flows. Sustainable fund assets reached a record high of €1.3 tn.
Introducing ESG data to issuers London Stock Exchange is committed to supporting issuers with the tools and resources they need to improve and strengthen their dialogue with investors and wider stakeholders on ESG.
As part of that commitment, all issuers will be able to access ESG data and scores powered by Refinitiv, one of the industry’s most comprehensive ESG databases, covering more than 10,000 companies across 76 countries and including more than 300 ESG metrics.
Access will be provided through the Issuer Services platform, our digital hub dedicated to services supporting public companies and their investors. Companies can use the platform to gain a truly global view of ESG performance in their sector, including data on carbon emissions, gender pay gap, environmental and human rights controversies and executive remuneration policies.
Not only does this provide every issuer with a wealth of comparative insights about ESG disclosure around the world, but it also enables issuers to build their knowledge and internal expertise in this vital area. In addition, it enables issuers to view ESG through the same lens that investors use – this is the same data that global investors are using to inform their capital allocation decisions.
The Refinitiv data gives issuers a global and holistic view of ESG disclosure. They can use the data to discover what best practice ESG disclosure looks like from around the world, understand the performance of individual peer businesses and gain a global perspective of ESG performance in their sector. London-listed companies in Refinitiv’s research universe can access all of their ESG data in one place and view their individual scores.
Refinitiv data: The features Not only is the database comprehensive, but it is also updated continuously so the ESG scores are refreshed and recalculated on a weekly basis. The data is aggregated and then grouped into 10 broad categories (such as emissions or human rights) to provide a category score for each company that is weighted according to industry group.
Each score is the percentile rank for a company within its industry group – in other words, a category score of 50 means that half the company’s industry group peers are better.
These category scores are then entered into one of three pillars – environmental, social or governance – to form three pillar scores, which in turn are combined to form a company’s ESG score. This provides a measurement of a company’s relative ESG performance based on verifiable reported data in the public domain.
The ESG score can also be viewed through an additional lens – the Controversy Score – to provide an ESGC score, which represents a comprehensive evaluation of the company’s sustainability impact and conduct over time.
Access to these global measurements of ESG performance, commitment and effectiveness represents a powerful tool for issuers in the development of their own ESG methodology and reporting.
Conclusion Providing Refinitiv ESG data and scores to London-listed companies is just one way we are supporting the transition to the low-carbon economy.
Investors are demanding transparency on information related to ESG to align with sustainable investment strategies and we are responding to this with a growing sustainable finance offering. Increasingly, investors are asking companies to provide sustainability data, yet companies often don’t understand how this data drives investors’ decision-making.
Building a deeper dialogue between issuers and investors is a priority – and it starts with transparent and accessible ESG data.
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