Summary
A US-based investment management firm wanted to launch ESG funds for investors in Europe. It onboarded Evalueserve as a strategic partner to provide in-depth reviews of its target companies’ E, S, and G performance.
Evalueserve leveraged its research and analysis expertise to offer qualitative assessment and scores for the target companies customized as per their internal framework and philosophy. Despite a tight deadline, the team delivered high-quality actionable insights and provided continued support to assess the target companies.
The Ask
An investment management firm wanted to launch an ESG fund within an extremely tight deadline. The firm wanted to develop an understanding of its target companies for the fund from an ESG perspective. Stringent regulatory (Article 8) reporting requirements as well as a lack of bandwidth within the in-house ESG team were major roadblocks for the firm. Therefore, it started looking for a strategic partner that could conduct detailed assessments of the target companies, as well as identify additional companies that could meet its objectives.
Our Solution
Evalueserve leveraged its in-house SME pool to put together a team within a short period to support and help the client meet its objectives. The team assessed large-cap global companies, covering almost 50 sub-sectors, and undertook deep dive assessments and ESG scoring based on the client’s sustainability framework and materiality thesis.
The team leveraged multiple sources to validate the target companies’ ESG performance, and delivered the following outputs:
ESG Assessment
ESG Scoring
Detailed ESG Report
ESG Assessment: It involved capturing data based on ESG criteria, as well as screening material investments and issues related to a company and its sub-industry. It also included monitoring the last three years’ news on product involvement and controversies.
- Environmental: The team collected data on how the target companies were managing their environmental impact. The factors considered for data collection were energy efficiency, climate change, carbon emissions, biodiversity, air and water quality, deforestation, waste management, etc.
- Social: The team developed an understanding of how a target company fosters its people and culture, as well as how it influences the broader community. The factors considered in this assessment were inclusivity, gender and racial diversity, employee engagement, retention, customer satisfaction, contribution to the community, data protection, privacy, labor standards, etc.
- Governance: The team assessed a target company’s internal system of controls, practices, and procedures. It also evaluated how the company avoids violations and ensures transparency and industry best practices (dialogue with regulators, etc.). The factors considered in the assessment included corporate ethics, internal controls, shareholder rights, bribery, and corruption.
- Product Involvement and Controversy: The team screened companies based on various positive and negative news, as well as involvement in controversies related to various environmental and social factors, and disputable products. The factors considered in the assessment included revenues from tobacco-related products, alcoholic products, weapons, cannabis, gambling, adultery, press sentiment scores and legal actions on ESG-related issues, etc.
ESG Scoring: The client’s scoring process included a rule-based framework that assigned sub-weights to ESG themes and related KPIs based on materiality. On the other hand, the team assigned scores on a scale of 1-5 based on the nature of the response in a criterion for the assessment period. The team’s weighted scoring mechanism enabled it to rate a target company based on the average score from the various criteria.
Detailed ESG Reports: The team’s detailed ESG reports provided a holistic view of the target companies. These covered material issues within a target company’s industry; performance on various ESG parameters; divergence and risk and opportunity landscape (based on controversy monitoring; and product involvement). The team also identified markers for review and topics for further engagement with the target companies for the client..
The insights helped in providing a dynamic perspective related to the accomplishments and inefficaciousness of the target company for which the assessment is conducted. Additionally, it covers its key alliances, and partnerships, strategies which in turn enabled the client to identify companies in transition to a low-carbon economy, assess risk & opportunities and take collaborative steps with their end client towards sustainability along.
Business Impact
- The client was able to meet its regulatory deadline while maintaining high quality of the output.
- Our actionable insights helped the client in its fund-related decision-making.
- The team’s continuous support and effort to assess additional companies expanded the client’s portfolio and helped it create a fund strategy.