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Digital Subscriptions > The Hedge Fund Journal > Issue 141 – Jun | Jul 2019 > SG and ESG: Research, Structuring, Indices and Issuance

SG and ESG: Research, Structuring, Indices and Issuance

Holistic, quantitative and qualitative E, S and G analysis

Open architecture ESG research

“SG’s sustainability research has been highly ranked in the Extel survey for the past decade,” says Isabelle Millat, Head of Sustainable Investment Solutions at Société Générale Corporate and Investment Banking – SGCIB. For instance, in the June 2018 survey, SG received 11.7% of commissions paid by key fund managers in the SRI & Sustainability category, and Yannick Ouaknine, Director, Head of Sustainability Research at SGCIB, was ranked in the top ive commission “rainmakers” in the Integrated Climate Change, SRI Research and Corporate Governance categories.

SG picks and chooses ESG raw data and research providers and partners according to the needs. SG has worked with Sustainalytics on a regular basis since 2010, and others – such as ISS-Oekom, Vigeo Eiris, Trucost – for specificity projects and reports, such as carbon data, or singling out the percentage of ”green” and “brown” revenues. “We used different providers for various differentiating angles,” says Ouaknine.

All these providers are striving to improve their data quality and coverage. For instance, Ouaknine explains that, “the Sustainalytics process has evolved in terms of data collection, and engagement. SG universe of coverage started with mainly European companies and has steadily expanded to US and emerging markets stocks. As corporate disclosure improves, the universe should continue to increase, to cover more mid-caps, smallcaps and so on. And regulations are encouraging transparency, consistency and harmonization in corporate disclosure”.

But the growing volume of raw data needs to be marshalled and manipulated in the right way to generate SG’s style of research. Ouaknine reckons, “a lot of the value added in our process can be attributed to qualitatively prioritising and weighting the key performance indicators (KPIs) for each sector. Whereas ESG ratings agencies tend to provide between 250 and 800 metrics per industry, we have distilled the analysis down to 17 salient KPIs for each sector (on average). This is important partly because not all fields in the agency reports are populated, and many of the reporting line items are duplicative. The weighting of E, S and G factors varies by sector. We prioritise those ESG factors that are material or relevant for the financial performance of specificity industries. For instance, governance and ethics is more connected to banks while airlines need to focus on emissions.”

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