An eye on a global ESG standard
Its acquisition by Moody’s promises to take Vigeo Eiris to the next level, says Emilie Béral, the company’s COO
Environmental Finance: What’s your approach to corporate ESG data collection and analysis?
Emilie Béral: Four principles guide our approach at Vigeo Eiris: objectivity, traceability, engagement and third-party verification.
Regarding objectivity, the data we collect is from multiple sources, not only from companies but also from their stakeholders, including media and groups such as global trade unions or NGOs like Transparency International. This ensures the analysis we provide is as objective and as independent as possible.
Second, traceability: we never include untraceable information and we maintain the ability to provide the source of all the information that goes into our analysis. We can always explain why we say something about a company.
Our third principle is engagement: we recently published a commitment to companies to ensure professional and efficient engagement, as they provide us with key information. The exchanges we have with companies are transparent; issuers are keen to understand the methodologies used to rate them. In 2005 we launched our VE-Connect platform to allow companies to see the whole rating process, to visualise and challenge data, and to engage with the analyst. This approach enables collaborative exchange with the agency.
Finally, to guarantee the quality of what we do, we have gone through the process of being externally certified: we received the ISO 9001 certificate, becoming the first agency to do so. It allows us to demonstrate that we’re eager to enter into a process of continuous improvement.
EF: How would you say you are differentiated from your competitors?
EB: First, we have been around since 2002 and, from the start, we have had a stable ESG rating methodology. When ISO 26000 was issued [in 2010], our own standard was fully compliant; this means we have a set of historical data that is unique in the marketplace. When new trends emerge – such as the Just Transition concept – we already have the data. For over 15 years, we have been looking at relevant factors, such as the way companies manage reorganisation, how they can attract and retain appropriate competencies, and how they are adapting their strategies to climate change.
Our framework involves a managerial analysis along three axes: first, looking at the engagement of the company; second, implementation, or whether companies apply what they say; and, finally, the outcomes, the results obtained.
This framework allows us to combine static analysis – such as a company’s carbon footprint – with more dynamic assessments, such as how companies are transitioning to a low-carbon world. By combining static and dynamic analysis, our clients can create investment strategies that can differentiate them in the marketplace.
EF: To what extent can ESG indicators be used to predict financial performance?
EB: Our goal is identifying the sustainability risks faced by issuers. We provide our clients with information on ESG performance and the capacity of issuers to mitigate risks to four asset classes: their reputation, human capital, legal security, and operational efficiency.
The data we deliver to our clients enables them to identify ESG weaknesses that could lead to these assets being downgraded, which in turn might have an impact on financial performance. To provide concrete examples: our research identified weaknesses in the ESG profiles of issuers that subsequently came under considerable market scrutiny – such as Facebook, Tepco and Volkswagen.
Our ESG research complements financial analysis by providing financial experts with a comprehensive view of an issuer and enabling them to make informed decisions on ESG issues that affect issuers’ intangible assets and ultimately their financial performance.
EF: What does your acquisition by Moody’s mean for your ESG data products?
EB: This is the combination of two leaders in the marketplace, with different objectives. Moody’s assesses creditworthiness or solvency risk, while we assess sustainability risk. What this shows is that ESG factors are now mainstream, and they have the capacity to inform credit analysis; Moody’s has been integrating ESG factors for years. The objective of this alliance is to create a worldwide ESG standard and create a larger footprint for Vigeo Eiris. We remain independent. This includes our scientific committee, which exists to ensure our methodology is independent.
EF: Where do you anticipate most growth in terms of ESG data products?
EB: We’re seeing a number of different trends – growing interest from private equity, from investors in small and mid-cap companies, and the emergence of new topics and market needs, such as around the Just Transition concept. The passive index market is also booming, and is set to continue, as it enables investment managers to quickly create products that are impactful. Growth will come from the capacity of agencies like us to provide solutions quickly, that allow our clients to find innovative ways of tackling the sustainability issues that we face.
For more information, see www.vigeo-eiris.com
- Environmental data
- Social data
- Governance data
What data do you provide?
- Our ESG Research provides up to 270 data-points per company. Companies are assessed on an ESG framework of 6 Domains (Corporate Governance, Business Behaviour, Environment, Human Rights, Human Resources, Community Involvement) and up to 38 ESG criteria (e.g: Corruption, Executive Remuneration, Energy, Non-Discrimination etc).
- Companies are assessed within one of 40 sector customised frameworks.
- Companies are given a range of absolute scores on a scale of 0-100 as well as ratings (relative performance metrics).
- We provide a Portfolio Analysis services benchmarking the performance of Investor portfolios to multiple aspects of our ESG research framework.
- Research is delivered monthly in excel format via our extranet platform (DataLab).
- Research can also be delivered via an API to clients that request this service.
- Our ESG research covers a universe of 4800+ companies from Europe, North America, Asia Pacific and Emerging Market regions.
Where and how do you source your data?
Vigeo Eiris collects and qualifies information published by and about the companies that it researches. The use of confidential information is prohibited. We use information from corporate reporting such as Annual Reports, Sustainability Reports, 10Ks etc. We also collect information directly from companies via our proprietary VE Connect© platform. This platform provides them with transparent access to their research frameworks and allows them to integrate responses in a precise fashion. Information provided through this platform is not used if it is labelled as confidential. We also use information from public stakeholder sources (Business and Human Rights Resource Centre, OECD Contact Point etc) including information that is provided to use through the partnership agreements that we have set up with specific international Trade Unions. Vigeo Eiris also uses the FACTIVA resource which provides research analysts with press material from over 30,000 online press sources.
Who are the data users?
The data is used by our global client base of investors for a wide range of purposes that include; portfolio analysis and reporting, portfolio alignment, index and fund development, best in class and exclusion strategies development. The data can also be used by academic institutions for research and analysis purposes.
What is the cost for your data offering?
From €8k upwards dependent upon the size of AUM of the client, and the depth, geographic breadth and thematic range of research data and coverage subscribed to.
What are the key attributes that differentiates the data you offer?
- Highly Structured Approach: our ESG research goes beyond binary yes/no analysis applying a systematic three pillar analysis approach for analysing all ESG criteria. We systematically examine the Leadership (policies) – Implementation (processes and systems) and Results (KPI trend analysis) on every assessed ESG criterion ensuring that our scores integrate a 360-degree assessment of its sustainability approach.
- Back history and Dataset Stability: the core architecture of our ESG research has not changed since its conception meaning that our dataset provides a stable back history of data across our coverage.
- Risk & Materiality Approach: our materiality approach factors in both the impacts on companies as well as the impacts on stakeholders meaning that our metrics are accurate measurements of the sustainability risk that a company represents.
- Quant & Qual Approach: our ESG research balances quantitative and qualitative analysis ensuring both utility and depth for the user.
- Transparency of Process: though our online platform VE Connect, all companies see all the criteria, questions, indicators and controversies that are actively affecting their assessments. They also have a free text space to provide commentary to Vigeo Eiris in a precise manner on any element of the assessment. The interactions on this platform are permanently visible between the agency and the issuer ensuring that there is no ‘black box’ in our process.
- Quality Assured Research: In 2019, Vigeo Eiris became the first major ESG rating agency to be awarded the ISO9001 certification for its methods and processes.
@Vigeo Eiris rates 4800+ companies on their #sustainability performance using our exclusive #ESG methodology. Covering 6 domains, 38 sustainability drivers & 1,000+ data points per company. #BecauseESGmatters https://bit.ly/2MfpWsK