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

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 involvement (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:

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 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.

ESG content set available for evaluation and testing beginning June 27, 2019

June 27, 2019

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. It will be available for evaluation via FactSet’s cloud-based Data Evaluation platform on June 27, 2019.

“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 136 industries in 139 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 as an evaluation feed 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 patented 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.

CSRHub
Media: Cynthia Figge
cynthia@csrhub.com

Two of CSRHub’s founders went to Harvard Business School.  (Cynthia and I were in the same study group!)  So we remain interested in the affairs of our alma mater—especially as they relate to sustainability.

Colleges and Universities are pretty interesting “entities” from a sustainability perspective.  Many of them are huge enterprises—as big or bigger than most major corporations.  For instance, Harvard University employs about 16,000 faculty and staff (more staff than the 11,000+ students they serve).  The University of Texas at Austin has about the same number of staff, 15,000, watching over its 50,000 students.  In contrast, US Steel employs only 21,000 people—not too different!

We have 11 sources of information and 158 elements of data available on Harvard University, but can only rate it on 8 of our twelve measures of sustainability.  This is a common situation for Colleges and Universities (we have 47 sources for US Steel).

We currently offer full ratings on only 9 of the 88 education entities that we cover in CSRHub.  This situation should improve as we gather more crowd and government sources.  (For instance, the US Department of Education provides an interesting Scorecard that has more than 100 data items per college.  (E.g., did you know that Harvard University graduates earn an average of $87,200 ten years after graduation, compared to $52,800 for UT grads?)

Colleges and universities face many of the same sustainability-related issues that businesses do.  For instance, Harvard has tussled with its host communities (with both Cambridge and Allston), as it has expanded its facilities and grown its “footprint.”  The University recently went through a strike with its food workers, narrowly avoided a strike with its janitors, and faces a unionization effort among its graduate student workers.  It has also made public commitments to reduce its carbon footprint, waste production, etc.

While schools like Harvard may have a “sustainability report,” few educational institutions have generated a GRI report (10 in the past two years out of the 88 entities in this group) and none have done a CDP report.  This lack of formal reporting, coupled with public/private governance structures that diffuse responsibility, make it hard to hold educational institutions to the same standard of behavior that we do for business entities.  However, the core buyer for education is young and more socially aware than the average consumer of most business products.  We expect to see students (and faculty) increase pressure on universities and colleges to both disclose more of their social behavior and to press schools to improve their social performance.

Search a company on CSRHub and see their sustainability performance.

Bahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. 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 provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 16,800 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 500 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

I’ve always been clumsy.  There were many broken dishes and glasses in my childhood.  My Mom was always kind about it.  She’d say, “Tears don’t mend broken China.”  She had other similar phrases I remember (e.g., “If you get a load of lemons, it is time to make lemonade!”), but the lesson was always Midwestern positivism.  Don’t sit around moaning about what can’t be fixed—keep moving forward and don’t let your own failures hold you back.

Our recent election broke dishes for those of us in sustainability.  Many of my friends in the field and a number of our clients have asked if US corporate sustainability programs will be put on hold for the next four years.

I’m not as good as my mother was, at mending dishes (or comforting someone who is crying!).  But I do see some reasons for hope:

• Well-run corporations care about profit, reputation, and mission. If their sustainability programs generate a profit, reduce risk, or help them accomplish their longer-range goals, they should continue to pursue them.
• Young folks soon take over. We get requests daily from students around the world who need data for a sustainability study or project.  For every student who majors in CSR there are ten other young people who care passionately about the world’s future.  Unless something dramatically changes how young people view the future, we will continue seeing a generation-driven rise in interest in sustainability.
• US companies trade with the rest of the world—and the rest of the world won’t backtrack on sustainability. If a US company wants to be successful in Europe, Asia, the Middle East, etc. it must adhere to a high standard of ethics, respect indigenous peoples, avoid polluting local water supplies, combat climate change, etc.
• US companies have the same stakeholders they did on November 7. Managers, employees, communities, suppliers, customers, and investors will continue to remind companies about the risks that companies will face if they do not behave responsibly. It will remain important to have a “social license to operate.”
• Momentum matters. Corporations are big ships that turn slowly.  They have put money and time into corporate social responsibility (CSR) programs.  They won’t shift these resources into other things, without good reason and a lengthy analysis process.

What types of changes may occur?  Don’t expect stringent new guidelines from US regulators (e.g., the SEC, the EPA, OSHA, etc.).  Look for more boycotts and “buycotts.”  (Several groups are boycotting Trump-related brands and there seems to be a countervailing push to punish firms that won’t advertise on Breitbart.)  Some companies may offer less-sustainable alternatives in certain product areas.  (E.g., muscle cars, heavily-sugared cereals, and other “retro” products.)  Corporations may put on hold major new green investments until things “settle down.” None of this is long-term stuff.  We can mend these pieces and fix these holes.

We at CSRHub see our data and tools as a way to improve how a company communicates its progress and a means to reduce the cost of and improve the effectiveness of sustainability reporting. My mom once put the lid of a tea pot I’d smashed under my pillow and told me that it would give me sweet dreams.  Let’s remember what we’ve been through and all that we’ve accomplished so far.  Then, let’s move forward and dream again, about a better future.

Photo courtesy of  Ruth Edwards

Bahar Gidwani is CEO and Co-founder of CSRHub.  He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. 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 provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 16,800 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 500 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.

We are thankful for all the hard work to advance CSR and sustainability this year. In gratitude, CSRHub will give you 10% off an annual plan AND give TEN students a free subscription for their academic research… from now until 12/31. We are calling this our One for Ten for CSR.

Every day we receive many requests from students around the world seeking access to our database for their research on company behavior. These students can change the world and often cannot afford even a reduced fee subscription.  

Many are reviewing their yearend 2016 budgets and telling us they are ready to start their CSRHub subscription. Are you ready to get started, too?  Simply use coupon code ONEfor10 during checkout.

There is no better time to gain full access to the world’s largest sustainability business intelligence database available. Our ratings and rankings tools will help you benchmark, evaluate, and improve company sustainability performance.

• 16,500+ companies to drill down to 12 subcategory levels and pinpoint areas to improve
• Ready-to-go, macro-powered dashboards to do the analysis for you
• API access – custom research – reports
• We can’t tell you this one yet – but it will knock your socks off! We are piloting a new tool to help you figure out which of your “high influencer” raters think you’ve been naughty or nice! 

More easy-to-use tools are under development right now to ensure you have a sustainable and successful 2017! Now is the time to get started - use coupon code ONEfor10 during checkout.

Do you need help picking out the best plan for your needs? Simply contact us and we will be happy to guide you and answer your questions. Please feel free to pass this offer along.

Sincerely,

Bahar and Cynthia

Bahar Gidwani and Cynthia Figge, Co-founders of CSRHub

CSRHub provides access to the world’s largest corporate social responsibility and sustainability ratings and information.  It covers over 16,000 companies from 135 industries in 133 countries. By aggregating and normalizing the information from 491 data sources, CSRHub has created a broad, consistent rating system and a searchable database that links millions of rating elements back to their source. Managers, researchers and activists use CSRHub to benchmark company performance, learn how stakeholders evaluate company CSR practices, and seek ways to improve corporate sustainability performance.