Does Your CFO Already Know? ESG Laggards Unveiled

Bloomberg partnership is creating transparency on Dow Jones Sustainability Index data
Does Your CFO Already Know? ESG Laggards Unveiled
Publ. date 13 Sep 2016
Since September 2016 listed companies that perform below par on ESG criteria have been unpleasantly surprised. Bloomberg, the data provider that informs investors and journalists on company performances and financial market developments, will disclose the ESG performance of both top performers and laggards.

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This disclosure is the result of a recent partnering initiative between Bloomberg and RobecoSAM, the asset management organisation that composes the Dow Jones Sustainability Index. It is safe to say that this brings bad news for the sustainable laggards who will be exposed on their underperformance, but good news for institutional investors and pension funds. Presented to them in a similar fashion as the regular financial information, in their Bloomberg terminal these investors will receive non-financial data that can help improve the sustainability of their portfolio. The Bloomberg terminal will share the scores on all criteria compared to best-in-class sector peers. This facilitates easy comparison for longer term investors that are comparing the sustainability risks and opportunities of their portfolio companies. 

Sharing ESG data with external partners is a major change in the policy of RobecoSAM, as previously the Swiss organisation has been communicating very sparingly on the results of its infamous annual Corporate Sustainability Assessment (CSA). Often criticised for its “black box approach”, the prediction is that this Bloomberg-RobecoSAM partnership will lead to a big increase in transparency.

The methodology of RobecoSAM consists of different elements. In 2016 some 3420 multi-national companies were invited to participate. In total 1986 companies were analysed of which 44% based upon their completed questionnaires. This leaves 1119 companies that are exclusively judged on the basis of public information. It is safe to say that of those 1119 companies, very few have made it into this year's Dow Jones Sustainability Index as announced last week.

Many CFO’s don’t realize that without participating, their companies' ESG performance will still be rated based on public data

Many companies that are not actively participating in the Dow Jones Sustainability Index, are not aware that their company will be rated anyhow on public data alone, predictably leading to a substantially lower score. Starting the 20th September these companies will find their low ESG scores in the hands of analysts and journalists. And as BlackRock recently stated: “There can be little downside to gradually incorporating climate factors into the investment process”.

Passiveness is about to be severely punished. Lack of active participation will no doubt result in significantly lower ESG scores. Harsh perhaps but inevitable if we are to accelerate the change needed on world’s largest sustainability issues. The key point is: does your CFO know it already?

Is your company looking to improve its sustainability performance or looking for more value from its ESG efforts? Please contact Josée van der Hoek, Director via Josee@finchandbeak.com or +31 6 28 02 18 80.

This article has been written by Marleen Janssen Groesbeek, Professor Sustainable Finance & Accounting at Avans Hogeschool and Josée van der Hoek, Director Finch & Beak. It was previously published on 27th July in "het Financieele Dagblad".

Photo credit: Flickr, Carlos Lorenzo

About Josée van der Hoek

Experienced strategic issues management specialist with expertise in strategy development, food waste and DJSI. | josee@finchandbeak.com

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