Expansion of ESG Data and Analytics Emphasizes This ETF

Not too long ago, it was difficult to obtain environmental, social, and governance (ESG) investing data, but now it’s available in spades.

Not only is broad-based data on ESG available, data analysts can slice and dice the sector to obtain niche data. This includes data that relates specifically to climate control.

“Even a decade ago, investors had limited information about important issues such as a company’s carbon footprint, diversity and inclusion practices, and workplace safety,” a FlexShares blog post said. “But as companies began reporting more of that data in response to growing demand from investors and regulators, organizations recognized the need for better tools to analyze and apply that data to investment decisions.”

The availability of data has been able to provide the impetus for new exchange traded funds (ETFs) on the market like the FlexShares ESG & Climate U.S. Large Cap Core Index Fund (FEUS). As its name suggests, the fund focuses primarily on large-cap holdings that address de-carbonization.

Big tech has been one of the sectors that have been spearheading not only climate control, but ESG in general. As such, investors will see big tech household names like Apple, Microsoft, and Amazon when they look at the fund’s top holdings.

That’s also evident when investors look at the sector breakdown for the fund. Almost 30% of the fund is comprised of information technology, with healthcare and consumer discretionary rounding out the big three sector allocations.

Partnering With a Top ESG Data Provocateur

Getting the right data to power a fund requires strong expertise. That’s exactly what FlexShares did in seeking out the assistance of Institutional Shareholder Services (ISS) to help assist with data for this climate control fund.

“We’ve partnered with Institutional Shareholder Services (ISS), a leading provider of ESG data specializing in carbon risk,” FlexShares noted. “The ISS carbon risk rating methodology measures a company’s carbon emissions as well as the specific carbon- and cli-mate-related challenges — physical, financial, regulatory and technological — that represent material risks to a company’s operations and long-term performance.”

“Like the SASB’s framework that identifies financially material sustainability issues for each sector, ISS examines each company’s carbon emissions, efforts to reduce its carbon footprint, and potential exposure to carbon-risk relative to other companies in its industry,” FlexShares added. “These sector/industry-specific ratings inform a detailed analysis on the holdings we select for our strategies.”

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