Supporting issuers with ESG data

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[1] indicated that investors plan to double their ESG assets under management by 2025, suggesting it marked 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[2], nearly two-thirds of institutional investors said they believe that alpha is to be found in ESG assets.

Sustainable funds attracted all-time high inflows of €120bn in the first quarter of 2021, representing more than half of overall European fund flows. Sustainable fund assets reached a record high of €1.3trn.[3]

Introducing ESG data to issuers

The 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 from 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 companies with a wealth of comparative insights about ESG disclosure around the world, it also enables issuers to build their knowledge and internal expertise in this vital area.

In addition, it enables companies to view ESG through the same lens as investors; 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.

For London-listed companies in Refinitiv’s research universe, they 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, it is updated continuously so the ESG scores are refreshed and recalculated on a weekly basis.

The data is aggregated and then grouped into ten broad categories (such as emissions or human rights) to provide a category score for each company which is weighted according to industry group.

Each score is the percentile rank for a company within its industry group (i.e. a category score is 50 means that half the company’s industry group peers are better).

The 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 are supporting transparency, sustainability and 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.
 

Tom Hinton - Head of Issuer Services and Digital Platforms Primary Markets

Tom Hinton

Head of Issuer Services and Digital Platforms Primary Markets
London Stock Exchange Group


[1] Source: Global Client Sustainable Investing Survey

[2] Source: https://www.im.natixis.com/uk/research/esg-investing-survey-insight-report

[3] Source: https://www.morningstar.co.uk/uk/news/211923/sustainable-fund-flows-hit-new-record.aspx

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