With ESG regulations still murky and unclear in the United States in particular, global financial institutions have come together with investors and businesses to create a free platform of non-biased ESG data, reports Barron’s.
This platform was developed by sustainability investment firm Arabesque and is accessible to anyone. The platform, ESG Book, pulls from hundreds of different ESG data points for almost 10,000 companies, most of which are gathered from public company documents and news releases.
ESG Book comes at a time when companies are increasing climate change commitments, vowing emissions reductions as they work to ultimately meet carbon-neutral goals. Financial institutions are getting in on the reductions too, with over $100 trillion in assets under management being committed to the Principles for Responsible Investment, a global accord by the financial industry worldwide to reduce the carbon footprint of funds and increase sustainability.
A lot of the data that is contained on the platform is readily available in public documents but is often buried within PDFs and presented in a manner that is difficult to compare to other data. ESG Book works to streamline all the information and data and make it readily available for anyone interested. Its ultimate goal is to connect investors and companies in dialogue and interaction, allowing investors to request up-to-date or more specific data from companies in real time.
The alliance that formed to create ESG Book includes Arabesque, major financial institutions such as Deutsche Bank and Allianz, standards organizations such as the Global Reporting Initiative, and shareholder advisors. Those that have committed include partners in emerging markets and the private sector, which is notorious for rarely reporting ESG data.
“Given the number of people around the table, this can be a game changer for the sustainability industry,” said Daniel Klier, CEO of Arabesque S-Ray and president of the Arabesque group.
Bond Investing With an ESG Focus
The continued growth of ESG and the creation of tools such as ESG Book demonstrates the focus and drive investors increasingly have when it comes to ESG priorities. SSGA currently offers a fixed income ETF with an ESG lens, the SPDR Bloomberg SASB Corporate Bond ESG Select ETF (RBND), for investors seeking bonds amidst market volatility but want an ESG focus.
The fund tracks the Bloomberg SASB U.S. Corporate Ex-Controversies Select Index and provides a sampling strategy to generally carry the same risk and returns of the index.
The index measures the performance of investment-grade corporate bonds issued by companies with certain ESG qualities that also have risk and return qualities of the parent index, the Bloomberg U.S. Corporate Index. The parent index has public-issued, fixed-rate, taxable, U.S. dollar-denominated corporate bonds. These bonds are issued by U.S. and non-U.S. industrial, utility, and financial institutions with a maturity of a year or greater and with $300 million or more of par amount outstanding.
The index uses a Responsibility (R-Factor) developed by SSGA to score companies in the parent index for ESG criteria. The R-Factor takes into account ESG and corporate governance factors when scoring companies. It excludes companies that derive significant revenue from any of the following: extreme event controversies, controversial weapons, UN Global Compact Violations, civilian firearms, thermal coal extraction, and tobacco. Companies that do not have an R-Factor in the parent index are also removed.
The securities within the index are weighted to maximize the R-Factor of the index while also minimizing total risk compared to the parent index.
RBND can be used as a core building block for ESG investing and carries an expense ratio of 0.12%.
For more news, information, and strategy, visit the ESG Channel.