CSRHub Blog Research on ESG metrics and comments on sustainability best practice

The Third Era of ESG Investment Integration

[fa icon="calendar'] Jan 22, 2020 10:34:56 AM / by Bahar Gidwani

As the 2020 ESG (Environment, Social, and Governance) season begins, we appear to be entering the third era of ESG investment integration.

The first generation of ESG investors used data on topics such as product involvESG arrowement (alcohol, tobacco, gambling) or business practices (anti-union, involvement in Burma) to screen out “bad” companies.  These investors often relied on a single data provider and simple guidelines (e.g., <5% of revenue is OK, more than 5% of revenue is bad).

The second generation of ESG investors decided that a company’s sustainability performance should be related to its riskiness and/or its financial performance.  They used multiple ESG data sets to scan large universes of companies such as the Russell 3000 or the MSCI ACWI.  It was hard to reconcile the disparate signals from these data sets—each was based on its own methodology towards measuring sustainability.  It was also hard to get coverage across an entire investment universe.  As a result, this approach required some finesse and finagling.  An analyst or portfolio manager might have to rely on his or her own instincts or insights about whether or not a particular company would fit into a given investment approach.

The third generation of ESG integration has now begun.  The existing data sets have been broadened to improve their coverage and their providers have clarified their methodologies.  New data sets are available that offer insights that were not previously available.  A wider range of asset owners are requesting investment products that have sustainability-related claims.  This has prompted the creation of passive ETFs, single theme funds (e.g., gender lens, decarbonized), and various types of hedge funds (including long-short and short-only offerings).

As is often the case with new theories, proof of their validity is not yet available.  While many claims of investment outperformance, risk avoidance, and social impact are being made, few participants in the ESG space seem able to share evidence that supports these claims.  Academic studies are lagging far behind.  Most seem to still be mulling era 1 or 2 issues.  This is not an unusual situation for the money management market.  Many past “hot” investment ideas have turned out to be money-losing duds.

It is probably impossible to list all of the themes that are currently being pursued.  There seem to be hundreds of competing theories for how best to generate and use ESG data.  Here are few of those that have received the most attention:


Why It Might Work

Issues and Concerns

Machine Learning

Natural Language Processing can look for signals of ESG-related opportunities or risks. By going outside the scope of most traditional ESG data sets, these systems offer a chance to trade ahead of the market.

Only a small number of companies have frequent signals. Both false positives and false negatives are hard to identify in advance. Only a limited number of investors can use a system before its benefits would be arbitraged by the market.


Certain ESG factors may be tied to a company’s success. An investor can combine data on these issues with traditional financial and market information to get a better long-range view of company’s future performance.

Various groups have attempted to identify which factors are material. However, their assessments disagree and there is little empirical support for any of these systems. In many cases, only a few companies report each factor. This makes it hard to do systematic research or to make consistent decisions across an entire industry.


Invest in companies that have weak ESG performance. Engage with them to improve their policies and reporting. Benefit from the increased attractiveness of the company to other ESG-interested investors.

Companies may not respond well to pressure from investors on business-related matters. It may take several years for the benefits of ESG-related changes to take effect and be noticed. Most investors don’t have such a long-term investment horizon.

Factor Analysis

Dump ESG data into a quantitative model and uncover significant factors. Structure a portfolio to take advantage of the results.

Given the lack of data (most ESG indicators are not available for most companies) and the inconsistent way that ESG data is generated and reported, the quality of ESG data may be too poor to use in quant models. ESG factors may not be stable over time, as they are driven by social issues and current topics.


Include ESG factors in the list of things that can be used to “tilt” a portfolio. Position the resulting portfolio as attractive to groups of investors who care about a particular ESG-related theme.

The restrictions associated with tilting portfolios generate tracking errors and can increase the costs of managing the portfolio. This may cause passive ESG funds to systematically underperform their benchmarks.


Combine together a lot of different ESG data sources. Create a new rating that incorporates the information from the underlying sources, but has broad coverage and an improved ability to predict future market performance.

Averaging disparate sources of ESG data does not give good results. (This was tested in era 2.) A new method for aggregation is required—one such as CSRHub that uses Big Data methodologies to properly weight and combine a range of sources. The resulting ratings may not contain alpha (but could provide an estimate of consensus that could be used to generate alpha via other means).


It takes at least three to five years to determine if an investment approach has promise.  It takes another ten years to be sure that the approach will survive the test of market cycles and changes in market structure.  The first and second eras of ESG integration did not produce any huge winners or star funds.  The third era has many new ideas and approaches.  Even without solid academic foundations, we can hope that one or more of them turn into a mainstream path for ESG integration.

To learn more about CSRHub, our ESG/CSR metrics or how you can improve your ESG scores, contact us here.



Bahar_Gidwani-10Bahar Gidwani is CTO and Co-founder of CSRHub. Bahar has built and run large technology-based businesses for many years. Bahar holds a CFA (Chartered Financial Analyst) and was one of the first people to receive the FSA (Fundamentals of Sustainability Accounting) designation from SASB. Bahar worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. He has founded several technology-based companies and is a co-founder of CSRHub, the world’s broadest source of corporate social responsibility information. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

CSRHub is the largest ESG and sustainability rating and information platform globally. We aggregate 230 million data points from 650+ data sources including leading ESG analyst databases. Our patented algorithm aggregates, normalizes, and weights data to rate 18,000+ companies in 141 countries across 134 industries. We track 97% of world market capitalization. We cover 12 subcategories of ratings and rankings across the categories of environment, employees, community and governance. We show underlying data sources that contribute to each subcategory’s ratings. CSRHub metrics are a consensus view (any 2 sources may have about a 30% correlation so we make sense of the disparate data). We tag companies for their involvement in 17 Special Issues. We provide Macro-enabled Excel dashboard templates, customizable dashboards, and an API. Our big data technology enables 85% full coverage of data across our rated companies and robust analyses. We provide historical ratings back to 2008.

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CSRHub Becomes an Official ESG Data Provider on Open:FactSet Marketplace

[fa icon="calendar'] Jan 9, 2020 9:31:52 AM / by CSRHub Blogging

ESG content set available for purchase now

CSRHub, one of the world’s broadest and most consistent sets of Environment, Social, and Governance (ESG) ratings, is pleased to offer ESG Business Intelligence data via the Open:FactSet Marketplace as an official provider. It is available for evaluation via FactSet’s cloud-based Data Evaluation platform now.

You can see a new video describing CSRHub’s ESG Business Intelligence data here.

CSRHub Official FactSet Provider


“Launching CSRHub’s ESG Business Intelligence Data on the Open:FactSet Marketplace allows us to greatly expand our reach in keeping with our mission to empower stakeholders with easy to use consensus ratings to help improve sustainability performance worldwide,” said Cynthia Figge, CEO and Co-founder of CSRHub.

“CSRHub is an excellent addition to the Open:FactSet Marketplace’s network of providers,” says Lauren Stevens, Senior Vice President, Open:FactSet Strategy, FactSet. “ESG data is in strong demand among investment managers, and this new offering gives our clients another dataset to leverage when managing risk and looking for new investment opportunities.”

CSRHub data helps investors, corporations, and consumers integrate ESG and sustainability into their decision-making processes. Using a patented algorithm that aggregates and harmonizes disparate data from over 600 ESG sources, CSRHub generates a consensus score for the ESG performance of more than 18,000 companies from 134 industries in 141 countries. Data from CSRHub’s big data process can be used to increase corporate market value, uncover portfolio opportunities and risks, and integrate ESG trends into other Business Intelligence data sets. For instance, CSRHub’s ESG signal can:

  • Identify risks and opportunities. CSRHub ratings represent the consensus opinion of a company’s ESG performance. Asset owners, portfolio managers, and investment analysts can compare their own assessment of a company against the CSRHub consensus and build alpha-creating strategies. CSRHub’s score is also used for screening potential investments and for examining the social impact of an existing portfolio.
  • Benchmark corporate ESG performance. Companies can compare their CSRHub rating to those of their peers or competitors using CSRHub’s broad industry and geographic coverage. Through these comparisons, managers can build strategies to improve upon existing practices, plan new sustainability-related programs and reporting, better manage their stakeholders’ perception of corporate values and social impact, and evaluate their brand’s CSR performance.
  • Backtest theories about ESG behavior. CSRHub offers monthly data back to 2008. Because CSRHub ratings are based on millions of data items drawn from hundreds of sources, they are stable, fit into a smooth distribution, and correlate well with other indicators. CSRHub ratings are used by hundreds of universities and have been cited in many publications.


CSRHub’s ESG Business Intelligence data feed is now available for purchase as an official provider on the Open:FactSet Marketplace (OFM).

For more information and to get started, see https://open.factset.com/products/csrhub-esg-business-intelligence/en-us.


About CSRHub

CSRHub offers one of the world’s broadest and most consistent set of Environment, Social, and Governance (ESG) ratings, covering 18,000 companies. Its Big Data algorithm combines millions of data points on ESG performance from hundreds of sources, including leading ESG analyst raters, to produce consensus scores on all aspects of corporate social responsibility and sustainability. CSRHub ratings can be used to drive corporate, investor and consumer decisions.

Media: Ruth Edwards

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Drucker Institute 2019 Management Top 250 Rankings includes CSRHub Metrics

[fa icon="calendar'] Dec 4, 2019 9:38:27 AM / by CSRHub Blogging

Drucker Institute Top 250 2019

CSRHub is honored to once again have our metrics included in the Drucker Institute Management Top 250 Rankings this year.

The Drucker Institute has brought together five dimensions of corporate performance—Customer Satisfaction, Employee Engagement and Development, Innovation, Social Responsibility and Financial Strength—to create a holistic perspective based on Peter Drucker’s core principles for ranking the top 250 companies worldwide.

"This was an important year for the Drucker Institute's company rankings, which form the foundation of The Wall Street Journal's 'Management Top 250' list, because there is so much attention now around the idea of companies balancing the needs of all stakeholders and not automatically putting shareholders first," said Rick Wartzman, head of the Drucker Institute's KH Moon Center for a Functioning Society. "This orientation—reflected and reinforced by the Business Roundtable's statement in August embracing a stakeholder model and rejecting shareholder primacy—has, in turn, spurred rapidly rising interest among executives, boards and investors in environmental, social and governance metrics, along with other non-financial indicators. Given that, there are more eyeballs than ever on our Drucker model. And so it's essential that the data we use in our rankings be unassailable. We're thrilled to count CSRHub as one of our key partners because we know that the data it provides is always of the absolute highest quality."

You can learn more about the 2019 measure on The Drucker Institute’s website at https://www.drucker.institute/programs/company-rankings/, with the full ranking of all 640 companies available at https://www.drucker.institute/2019-drucker-institute-company-ranking/.

To learn more about CSRHub, our ESG/CSR metrics or how you can improve your ESG scores, contact us here.


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CSRHub’s Cynthia Figge Speaking at Sustainable Brands New Metrics ‘19

[fa icon="calendar'] Nov 6, 2019 9:50:37 AM / by CSRHub Blogging


CSRHub CEO and Co-founder, Cynthia Figge will be speaking at the Sustainable Brands New Metrics ’19 Conference, in Philadelphia, Pennsylvania, held November 18-20, 2019.

Cynthia will be joining a keynote plenary panel speaking on Trends and Opportunities in Values-Based Investor Engagement on Wednesday November 20, 2019.

This session will discuss the trend of values-based investing as part of the rapidly changing sustainable investing space. The conversation will cover the main ways in which investment patterns are being adjusted or transformed in light of the growing importance of sustainability issues and new types of relevant company data. Participants will also address the effects that these new dynamics are having on relationships between companies and investors.

Trends and Opportunities in Values-Based Investor Engagement
Wednesday November 20, 2019

Cora Olsen Cora Olsen, Global Lead, Integrated Reporting, Novo Nordisk
Megan Maltenfort Megan Maltenfort, Director, Corporate Responsibility & Sustainability, Campbell Soup


Cynthia Figge, CEO and Co-Founder, CSRHub


Friends of CSRHub will receive 20% Discount on registration!

Please register here with code “CSRHub”.


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Who is responsible for a company’s ESG communications? Latest study from IR Magazine looks for answers

[fa icon="calendar'] Nov 5, 2019 9:29:46 AM / by CSRHub Blogging

A recent IR Magazine and Corporate Secretary survey found a disconnect from company to company, with regards to who is responsible for ESG communications. The results show ESG communications responsibility changes according to various factors, including cap size, region and company size.

Primary responsibility for ESG communications rests with a dedicated sustainability team at more than a third of companies polled, while responsibility lies with corporate communications at a further 28 percent. Depending on cap size, responsibility lies predominantly with the corporate or company secretary, while corporate communications tend to hold responsibility for ESG at smaller cap companies.[1]

As a result, IR Magazine and Corporate Secretary have launched a series of forums on ESG integration to bring together investor relations, sustainability professionals and corporate secretaries from a variety of public companies, to discuss how to take an integrated approach to investor expectations on ESG factors. The events will help companies make sense of the evolving trends around ESG and take action to improve relationships with shareholders, future-proof their businesses, and ensure a smooth proxy season. The team behind the events are keen to ensure that attending companies leave with a to-do-list that they can implement immediately.

Following the success of last year’s forum which saw more than 150 professionals in attendance, CSRHub is partnering with IR Magazine and Corporate Secretary to help companies respond to the growing demand for improved ESG practices and disclosures. The forum in London takes place on November 7.

The ESG Integration Forum that takes place in New York (December 5) is part of Sustainable Finance Week, a series of events based in New York focused on accelerating the next $10 trillion dollars in sustainable finance. There will be more than 1500 investors and corporates in attendance across all events that week - so there's only one place to be that week!

To find out more and book your place:

ESG Integration Forum – Europe, November 7, London: IRMagazine.com/esgeurope/

ESG Integration Forum, December 5, New York: IRMagazine.com/esg/


[1] IR Magazine Partners, ESG & Investor Engagement, 2019 https://www.irmagazine.com/content/esg-investor-engagement

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