As investment strategies based on environmental, social and governance (ESG) factors have morphed from the fringe to the mainstream, several entities have created indexes and other metrics to help investors incorporate those values into their portfolios.
The newest player on the scene, the Thomson Reuters Corporate Responsibility Ratings (TRCRR) ESG Portal, is an online offering launched in April that’s available to financial advisors, among others.
The portal is a collaboration between S-Network Global Indexes Inc., a New York City-based data consulting firm and index developer, and global information services company Thomson Reuters. It affixes ESG ratings to more than 4,600 public companies worldwide constituting more than $47 trillion (91.3%) in global market cap.
The ratings are based on roughly 225 key performance indicators (KPIs) and more than 500 individual data points provided by Asset4, a unit of Thomson Reuters. The KPIs run the gamut from carbon emissions, water usage and workplace safety to compensation policy, disclosure practice and human rights.
For each company screened, the TRCRR ESG Portal has eight numeric values quantifying its rating and ranking for environmental, social and corporate governance factors, along with aggregate ESG performance.
Say you have General Electric in your portfolio and you want to see how it stacks up in the ESG department. Type the company name in the search bar, and a box quickly appears with category ratings and rankings from year-end 2007 through year-end 2013. As of the end of last year, for example, the company had a composite ESG rating of 78.60, which earned it an overall ESG rank of 98.60 among all companies included in the portal’s universe. (This perhaps suggests that if an overall score of nearly 79 can put a company near the top of the list, there’s room for lots of improvement in ESG performance by corporations.)
Users of the portal can check out individual stocks, create and save portfolios using ESG criteria, and create standardized portfolios by country or region, sector or industry. “If you’re interested in energy companies and believe it might not be prudent to exclude fossil-fuel companies, you could include those with the best practices,” says Herb Blank, senior consultant with S-Network. He adds that the portal can help RIAs screen portfolios for clients who have an ESG awareness.
The portal’s target markets are financial institutions and money managers, but Blank anticipates that financial advisors will also become an important market. Advisors can pay a yearly fee of $600 to access the portal, or test it out at $59 per month, with the option to upgrade to a yearly plan.
Being the new kid on the block, the TRCRR ESG Portal joins existing competitors offering analytics and investible indexes based on ESG and sustainable investing principles. One of them is Sustainalytics, an independent ESG research and analysis company focused on institutional investors. In May, it announced a deal to make its ESG data available to subscribers on the Bloomberg Professional service platform.
Another significant player is MSCI and its suite of ESG- and sustainability-related indexes that underlie funds and are used as benchmarks by investment managers.
The TRCRR ESG Portal contains its own suite of 12 ESG-focused indexes. “We expect them to underlie ETFs and/or mutual funds,” Blank says. “Some ETF providers are now considering them.”
Meanwhile, the current thrust of the portal is aimed at helping the investing public incorporate ESG factors into its decision-making. To Blank’s knowledge, the portal is the only entity that supplies ESG ratings through the Web to non-institutional investors.