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Honing Sustainable Investing Strategies with Robust Environmental Data

Honing Sustainable Investing Strategies with Robust Environmental Data

At a virtual meeting of the UN General Assembly in September 2020, Chinese President Xi Jinping said the country planned to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060. If the pledge is translated into a plan and executed successfully, it has potential to be the most significant development in the energy and fossil fuel markets in decades. These targets cannot be met, however, without ambitious climate action in the private sector.

This global investment manager in China is a signatory of the United Nations-supported Principles for Responsible Investment (PRI) and a supporter of the Task Force on Climate-Related Financial Disclosures (TCFD). The global investment services group is tasked with developing appropriate sustainable investment strategies and wanted to enhance its in-house ESG scoring system by adding additional environmental data to support portfolio screening, monitoring, and optimization.

Pain Points

The firm had been using a third-party provider for environmental, social, and governance (ESG) information, but information was limited and didn’t include quantitative, in-depth data on carbon emissions and other important environmental factors. As a result, the global investment services group wanted to find an alternative solution that offered:

  • Global leading expertise in environmental and climate analysis.
  • Comprehensive and reliable data to assess the carbon footprint of companies currently in the company’s portfolios, or being considered for investments.
  • The ability to analyze data with robust tools on a desktop platform.
  • The additional ability to feed data into the company’s internal data warehouse to run proprietary scoring models.

The company had heard about S&P Global Market Intelligence (“Market Intelligence”) and S&P Global Sustainable1’s leading position in the ESG space, and reached out to learn more about its offerings.

ESG factors continue to gain attention, in particular with investment managers looking to adopt carbon-sensitive strategies to meet the needs of stakeholders. This firm has been a leader in sustainable investing and was looking to take its ESG analytical capabilities to an even higher level.

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The Solution

Market Intelligence discussed services offered by S&P Global Sustainable1, especially Trucost’s environmental analytics that have been assessing risks relating to climate change, natural resource constraints, and broader ESG issues since 2000. Trucost’s solutions support financial institutions in getting ahead in the transition to a low-carbon, sustainable economy. The environmental and climate data and related analytical tools would enable the global investment services group to:

Evaluate the carbon intensity of investment portfolios

Trucost Climate and Environmental Data provides quality-checked and standardized environmental data on more than 22,000 companies.1 Users can measure impact, identify exposure, and manage risks and opportunities across different asset classes, addressing the challenges of climate change, water use, waste disposal, and the over-exploitation of natural resources.

The subset of company-level carbon emissions data covers Scope 1, 2, and 3 with metrics on quantities and intensities of carbon-equivalent emissions (tCO2e, tCO2e/US$ revenues) and their estimated damage cost equivalents (US$), along with impact ratios. As with all environmental data, it contains sector revenue data that gives revenues and percentages of company revenues derived from each of Trucost’s 464 business sectors. Data goes back to 2005, where available.

Leverage robust desktop tools

Availablity on the S&P Capital IQ Pro platform enables users to incorporate climate and environmental analysis with financials, market, and asset-level data for a holistic analysis to support their business decisions.

Easily feed data to internal applications and workflows

A desktop solution for quick access is complemented with XpressfeedTM that automates the download and management of Market Intelligence data and enables delivery as needed in a ready-to-query relational database to link to internal applications.

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Key Benefits

The global investment services group saw many benefits to the Market Intelligence solution, including the ability to:

  • Save time on data gathering activities with access to one source of comprehensive, standardized, and reliable environmental information. 
  • Conduct deep dive analysis to identify a portfolio's largest contributors to carbon/environmental externalities.
  • Quantify emissions associated with downstream supply chain activities of portfolio holdings.
  • Enhance portfolio optimization and capital allocation by incorporating environmental factors into risk and opportunity analysis.
  • Quickly review data and run portfolio analytics on a robust/one-stop desktop platform.
  • Enhance existing ESG scoring models and improve workflows with easy integration of data with internal applications using a powerful data feed solution.
  • Utilize the solution to conduct ESG fundamental research, monitor risks, and support the company’s overall ESG strategy.

[1]All data as of September 2021.