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ESG risk focused metrics as an integral part of sound investment risk management? Evidence from Investec Asset Management

As an ESG data provider, we get a lot of questions about the best way to incorporate ESG data into investment processes in order to both reduce risk and boost returns.

In a recent presentation covering exploratory work, The role of data in ESG & impact investing,”, the author walks through how Investec (a USD 145.2 billion (31.03.19) AUM asset manager) thinks about responsible investing and how the firm uses RepRisk’s ESG data to complement fundamental research and mitigate ESG risks within the portfolio.

Investec conducted a back test to analyze the dispersion in performance according to the scope and scale of relevant ESG issues and concluded that:

  • the higher the number of ESG issues, the more likely that there is a negative outcome,
  • the likelihood increases over time, and
  • focusing on issues can help to mitigate ESG risks.

Here is a brief excerpt from the presentation: “RepRisk’s focus on capturing adverse information, the differentiated approach and its fast moving and event-driven data makes it a core component of our ESG analysis. The increased granularity through assigning risk incidents to categories allows us to perform a deeper analysis and hence get more out of the data than simply ESG scores.”

To learn more about the RepRisk methodology and how our data on ESG risks can help inform your investment decisions, please reach out to us at support@reprisk.com or to the relevant FactSet Sales representative (https://open.factset.com/products/reprisk-esg-business-intelligence/en-us)

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