Refinitiv launches fund ESG scores to compare sustainability performance

ESG valuations

Refinitiv has launched ESG scores for funds, allowing comparisons at the fund level for fund managers, advisers and investors, as the world of sustainable investing continues to boom.

The data provider has created Refinitiv Lipper Fund ESG Scores for 19,000 unique portfolios representing USD15.7 trillion in total net assets across equity, bonds, and mixed funds. 

The scores measure ESG performance, commitment, and effectiveness across 10 themes including emissions, environmental product innovation, diversity and inclusion, human rights, shareholders. These are based on publicly-reported data on constituents within the fund across the three pillars, Environmental, Social and Governance.

“ESG scores are a uniquely effective way to assess performance across industries, factoring in issues such as materiality and transparency stimulation, and serve as an objective and impartial assessment of the importance of each ESG theme to different industries,” says David Craig, CEO of Refinitiv.

“It has become imperative for financial markets to address so investors can direct funds to transitionary projects and away from high carbon and carbon-equivalent industries, and to meet an increasing number of regulatory mandates. Sustainable finance isn’t just a political or social choice – it’s a smart business decision.” 

According to Morningstar, global sustainable funds saw USD45.6 billion of inflows over the first quarter of 2020, appearing to completely avoid the coronavirus sell-off. The fund landscape has been hit by a flurry of ESG fund launches in the last month, with big players including Aviva, Natixis, Morgan Stanley, and Vanguard all launching new sustainable ventures. 

“The ESG market is evolving rapidly and means many different things to different people,” noted Natixis’ head of multi-asset portfolio management, James Beaumont in June at the launch of a new fund of funds, offering multi-asset exposure to over a dozen ESG funds.

Refinitiv notes that there is a wide variety among funds that have a self-identified ESG focus, ranging from those that apply negative screening to those with deep ESG integration for risk management purposes, and from models that correlate certain ESG metrics with alpha generation to those focused on measuring impact. 

The scores bring together the Lipper fund universe of 330,000 fund share classes and ESG coverage on over 9,000 companies, with Refinitiv’s scoring methodology, which factors in issues such as materiality and transparency stimulation. 

Leon Saunders Calvert, head of Sustainable Finance, Lipper & I&A Insights, Refinitiv, says: “In addition to servicing the ESG expert community we believe we can help mainstream sustainability into the financial markets by delivering meaningful data, analytics and tools to finance professionals, allowing them to incorporate ESG factors more easily into the investment process.”

Wally Okby, a senior analyst at Aite Group, agrees, adding: “The benefits of more consistent and transparent ESG data clearly assist investors’ capacity to weave sustainability factors into their investment portfolios, aligned to their social values. With increased demand for ESG and sustainable investing since the onset of Covid-19 observed by about half of wealth management firms in our global ecosystem, the launch of fund ESG scores is certainly opportune and beneficial at this juncture in time.”

The fund ESG scores are available on Refinitiv Workspace, Eikon or API Feed.