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Jun 30, 2020

ESG ratings added to Spanish service for companies without analyst coverage

Lighthouse to incorporate ESG scores using methodology provided by KPMG

A group of Spanish companies that lack traditional analyst coverage will receive an ESG rating under a project that supports small and mid-caps.

Lighthouse, launched two years ago by IEAF, a professional association for financial analysts, provides fundamental analysis on companies in the Spanish market not followed by banks or other research firms. 

The service currently employs four analysts covering 14 companies listed in Spain. It is supported by Spanish exchange operator BME, which was acquired by Swiss group SIX earlier this month. 

The new ESG ratings will be added over the coming weeks, with the methodology provided by KPMG, according to a statement from IEAF and BME. The change will enhance the information offered by Lighthouse and help investment funds that rank companies based on ESG factors, the statement adds. 

Investor interest in ESG funds has continued to grow in 2020 despite the market volatility caused by the Covid-19 pandemic. Sustainable funds saw $46 bn of inflows globally in the first quarter, compared with $385 bn of outflows for the overall fund market, according to data from Morningstar.

The demand for more data and analysis on ESG issues has raised the profile of specialist research providers such as Sustainalytics, MSCI and ISS. As with other forms of equity research, however, smaller companies are in danger of missing out on coverage. 

Lighthouse provides research to help build the profile and liquidity of issuers but does not offer buy or sell recommendations. It was set up shortly after the introduction of Mifid II, which many feared would lead to a fall in research on small caps. At the time of the launch, BME said around 50 percent of companies on the Spanish equity market lacked analyst coverage.