A sustainable future post COVID
S&P Global is integrating ESG, climate and SDG datasets and even post-Covid analysis, Richard Mattison, CEO of Trucost, part of S&P Global, tells Environmental Finance.
Environmental Finance: Covid-19, rather than pushing climate change down the agenda as some feared, appears to be even accelerating action in some areas. I understand you’ve looked at how our response to the pandemic could help us meet the Paris goals. What does the data show?
Richard Mattison: We looked at the operational changes that many businesses and individuals have put in place in response to the pandemic. We found that, if people were to work from home three days a week that alone would put the passenger transportation sector on a 2°C-aligned pathway. If we were to cut business travel to 60% of its pre-Covid levels, it would align aviation with climate objectives. And if we bought just 7% of products locally rather than importing them, that would put the whole shipping sector on a two-degrees pathway. Some relatively small behavioural and policy changes could make a huge contribution to achieving the Paris goals.
We wanted to put that research out there because, as an organisation, we are looking closely at how we can accelerate progress on global sustainability goals – ESG, climate change and SDGs are strategic priorities.
EF: Given the firm’s increasing focus on ESG, climate and the SDGs, how has S&P integrated them into its product offerings?
RM: S&P is a very large company. We’ve the world’s largest credit rating agency S&P Global Ratings; the largest index business S&P Dow Jones Indices; S&P Global Platts, which provides pricing benchmarks across energy commodities; and S&P Global Market Intelligence, which offers analytics, financial point-of-time information, earnings estimates and now ESG information to market participants.
We see a huge opportunity to accelerate progress by ensuring ESG is integrated into core benchmarks used by the market.
EF: S&P has also recently acquired one of the oldest names in the ESG ratings business, SAM from Robeco. How have you incorporated its analysis into your ESG suite?
RM: SAM sits within S&P Global, feeding all four divisions with ESG intelligence. SAM’s approach is unique: it directly engages with companies that provide both public and private ESG information, leading to SAM collecting a huge amount of information – such as attrition rates – that you won’t see published elsewhere. Since acquiring SAM, we have integrated that information into our business, and we’ve launched S&P Global ESG scores on our Xpressfeed data feed solution, covering more than 7,000 companies.
A key benefit is that users can now access ESG information alongside and linked to core financial information made available by S&P Global Market Intelligence. Investors can ingest all this information into their own systems and use it in their investment decision-making processes. Having ESG information integrated saves having to do a lot of background work to link ESG information with financial information for a particular company or across a portfolio.
EF: What would you say differentiates S&P when it comes to climate data?
RM: On climate, the scale of investment at S&P is huge; it’s a particular passion of our CEO. We have focused on making sure we can produce datasets that are investment-relevant and that are forward-looking and dynamic. For example, on climate-related physical risk, we’ve undertaken a huge data exercise to map every asset owned by 15,000 companies globally, and how they're going to be exposed to different types of physical risks. Combining these data with our extensive data on transition climate risks, including carbon pricing and sector specific datasets, informs in-depth quantitative scenario analysis aligned with the recommendations of the Task Force on Climate-related Financial Disclosures.
EF: Finally, a growing number of Investors are concerned about assessing impact. How do you go about helping them understand the impact their investments are having?
RM: We believe the Sustainable Development Goals [SDGs] are an appropriate framing for measuring progress, but investors seeking SDG-aligned capital allocation are hampered by patchy company reporting. We’ve produced a balanced way of assessing positive and negative impact across products, operations and supply chains. Critically, we also provide context on where in the world companies are providing SDG aligned solutions to factor region-specific risks and value creation opportunities. This dataset covers 3,500 companies, analysing over 460 different business activities across 189 different countries and regions. We believe this is a unique data set, taking account of positive and negative SDG impacts in a comprehensive way.
Given that we’ve only got a decade to achieve the SDGs, this is incredibly important. Achieving the SDGs needs to be linked to a post-Covid economic recovery and this will only happen if capital markets can assess progress in a consistent way. We have an opportunity to build back better in a way that is in alignment with these global goals.