IR teams increase focus on ESG ratings, but find fault with analysis
IR teams have upped their focus on the output of ESG research providers amid broad dissatisfaction with the analysis being conducted, according to new research.
In a global survey of IR professionals by BNY Mellon, 62 percent of respondents say they monitor their ESG ratings, a rise from 45 percent in 2017 and 41 percent in 2015.
Larger companies are more likely to monitor the output of ESG ratings providers, notes the survey. More than 80 percent of mega-cap respondents say they undertake this task, compared with just 29 percent at small caps – a difference likely down to the increased IR resources at larger companies.
The rapid expansion of sustainable investment is creating strong demand for ESG ratings and data. In 2019, investors put record amounts of money into ESG funds in both Europe and the US markets.
The need for data providers to incorporate ESG metrics into their services is leading to acquisitions in the sector. Last year, S&P Global agreed to buy the ESG ratings business of RobecoSAM, while Moody’s Corporation took a majority stake in sustainable research firm Vigeo Eiris.
While the amount of ESG research in the market is booming, IR teams appear broadly unhappy with the accuracy of the output. In the BNY Mellon survey, just 12 percent of respondents say they agree with the ‘analysis of their company by ESG rating providers’.
But companies are not passively standing by: the survey finds that 52 percent of IR teams say they communicated with an ESG rating provider during the last year, a rise from 34 percent in 2017.
‘Some of the larger managers get access to all the data providers, and still do their own analysis on top of that,’ says Guy Gresham, group head of global IR advisory and investor solutions at BNY Mellon Depositary Receipts.
‘So even if one research firm is not completely aligned with your expectations, ensuring you understand what your top investors are consuming can be much more productive than trying to influence some of the providers at this stage.’
The BNY Mellon survey polled 335 IR professionals based in a total of 41 countries. Among the other findings, the study finds that there remains low awareness of the Task Force on Climate-Related Financial Disclosures (TCFD) among many issuers.
A majority of survey respondents say they are not familiar with the TCFD (53 percent), while a further 15 percent say they are uncertain about what it is.
Launched in 2015, the TCFD’s reporting recommendations are being increasingly promoted by investors and regulators as a way for companies to address the potential impact of climate change on their businesses.
Last month, the TCFD announced it had passed more than 1,000 supporters globally – a diverse group including companies, stock exchanges, national governments, research providers and others.