Truvalue Lab Hosts Deep Dive into Urgent, Actionable and Innovative ESG Investing Solutions

Blog November 14, 2019

Forum featured prominent industry leaders and academics from across the globe

Last week, industry experts and leading academics from 18 countries descended on London for the 4th Truvalue Labs ESG Investing Forum. A whirlwind of ESG-related events and activities awaited them. Here’s a wrap up of how the day unfolded.

Academic Roundtable

On the morning of the Forum, 34 members of the Truvalue Labs’ Academic Research Network gathered in a closed-door session to share their cutting-edge and actionable research using Truvalue Labs’ data.

Covering topics as diverse as ESG and value creation, market reaction to corporate ESG news, the financial sector’s contribution to the SDGs, and the relevance of financially-weighted materiality (among others), the Academic Roundtable provided a rich and varied tapestry of some of the most exciting research being done with ESG data globally.

ESG Integration Workshop

Also on the morning of the Forum, an intimate group of ESG practitioners gathered for an interactive workshop. After an introductory presentation, participants were divided into groups and provided different sets of ESG information. For the next few hours, participants were tasked with conducting a detailed financial analysis and valuation exercise, ultimately presenting and defending their findings to the group.

The hands-on workshop was designed to bring participants right into the heart of ESG integration as a practice. There’s nothing like getting your hands a little dirty!

ESG Investing Forum

 

Urgent. Actionable. Innovative.

These were the words that echoed in the audience’s mind throughout the day. Over the course of an afternoon’s worth of panel sessions and research spotlights, ESG investing reigned supreme, with urgency, actionability, and innovation as the themes underpinning it all.

Avoiding Meaningless Progress: Extinction Rebellion and the Investment Community

Kicking the Forum off with a bang, the first panel was moderated by Daniel Brooksbank of Responsible Investor and featured a leader of one of the most talked about organizations in the UK: Extinction Rebellion. Andrew Medhurst set the tone for the day by pressing upon the audience the urgency of the moment at hand, challenging them to consider whether they *truly* understood that this is an emergency, and championing a societal war-time mobilization effort similar to WWII.

Panelist Ben Constable of M&G Investments took a more measured tone, arguing that carbon pricing is an incredibly important mechanism that should be scaled up. In arguing against the panel’s namesake “meaningless progress,” Dr. Robert Eccles of the University of Oxford asserted that climate scientists are naive about capital markets and vice versa. He advocated brokering a conversation between the two, claiming that urgency from scientists can bleed over into the investor community.

“A governmental focus on climate change is essential because individual actions can only get us so far.”

Andrew Medhurst

Extinction Rebellion

Emerging Best Practices in ESG Integration

Next up was a panel on ESG integration that was moderated by Jeff Cohen of SASB. The session provided a nitty gritty deep dive into the intricacies of ESG investing, analyzing the qualitative elements as well as the quantitative, and how the two sets of data interact.

Michael Viehs of Hermes Investment Management stressed that high quality, quantifiable ESG data is hugely important but that human interpretation is instrumental as well. Providing a tangible sense of how ESG data can be used, Helen Price of Brunel Pension Partnership described how she routinely cites ESG data in conversations with asset managers and companies, ultimately pushing both towards long-termism.

“It’s YOUR job to engage with companies. Variations among data providers and low correlations may exist. So do the work!”

Justin Kew

Carmignac

Five Ways that ESG Creates Value

In the first research spotlight of the day, Witold J. Henisz of The Wharton School provided a whirlwind tour of his latest research exploring the mechanisms by which ESG creates value.

He urged the audience to dig deeper into mechanisms by which data can inform investment decisions. He noted that investors care about alpha and beta but, in addition, about forecasting topline growth, costs, regulatory & legal issues, worker productivity, M&A and divestment. He also invited practitioners to partner with academics to help educate the next generation of asset managers.

“Stop asking whether ESG leads to alpha and start exploring how.”

Witold J. Henisz

The Wharton School, University of Pennsylvania

Incorporating the SDGs into Investment Strategies

How can the SDGs inform the investment process? And what’s the relationship between ESG and the SDGs? Thus began the next panel, moderated by Jim Hawley of Truvalue Labs.

Huub Van Der Riet of NN Investment Partners made the case that many companies use SDGs for greenwashing, and that for impact measurement to be taken seriously it needs to be elevated to the next level. Expanding on her attempt to do just that, Costanza Consolandi of the University of Siena walked the crowd through her new research mapping the SDGs to the SASB issue categories (which have industry-specific metrics tied to them).

Does the Market React to Corporate ESG News?

In the next research spotlight, Aaron Yoon of Northwestern University presented new research that he and George Serafeim of Harvard University have conducted on how corporate ESG news does, in fact, move markets. Particularly in the context of “unexpected news,” market-adjusted returns react to news that is related to material issues.

Creating Value with ESG

For the final research spotlight of the day, Stephen Malinak of Truvalue Labs walked the audience through his recent backtest study, which revealed the effectiveness of Truvalue Labs’ timely ESG signals as screening tools and quantitative alpha factors against a wide variety of global and regional equity benchmarks. The talk is also available as a webinar.

The Future of ESG Research – Consolidation, Regulation & New Technology

Wrapping up the day with a look towards the future, the final panel (again moderated by Daniel Brooksbank of Responsible Investor) explored just where ESG is headed. Ben Caldecott of the University of Oxford argued that geo-spatial data analysis using satellites and drones is bringing earth observation into the ESG conversation at a rapidly expanding pace.

Julie Hudson of UBS Investment Bank provided a real world case study, explaining how UBS considers ESG and is working to embed the practice of ESG integration across various business units in the firm, demonstrating how large financial institutions view ESG as the future. Finally, Thomas Kuh of Truvalue Labs catalogued the M&A and consolidation landscape of ESG research and data providers, arguing that the scale of ESG research is growing and largely demand-led.

“Technology is the right tool for the job. It’s the only way to appropriate data from the great wave of unstructured data.”

Thomas Kuh

Truvalue Labs

And That’s a Wrap!

With the close of the Forum leading into networking drinks and reception, a full day of ESG activity came to a close. We look forward to seeing you at future ESG events!