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Asset Owners & the dangers of 'estimated data'

Earlier this year FTSE Russell published their annual global asset ownerย survey, focusing on their attitudes, priorities and decisions being made onย sustainable investment.

You can read the full results of the survey here.

One of the key readings taken from this survey was that over half of asset owner participants believe that the primary obstacle to increased sustainable investment adoption is concerns about availability of ESG data and the use of estimated data.

We have written about the issue with guesstimated data before.

Some large ESG ratings firms have padded their systems with estimates and averages in order to provide larger (and more expensive) coverage and more 'comprehensive' data solutions.

However, there are many issues with this approach - three key problems being:

๐Ÿญ. ๐™Ž๐™๐™ค๐™ง๐™ฉ-๐™ฉ๐™š๐™ง๐™ข๐™ž๐™จ๐™ข ๐™ž๐™จ ๐™– ๐™—๐™ง๐™š๐™–๐™˜๐™ ๐™ค๐™› ๐™›๐™ž๐™™๐™ช๐™˜๐™ž๐™–๐™ง๐™ฎ ๐™™๐™ช๐™ฉ๐™ฎ.

Many investors blindly trust these large legacy brands and their ESG ratings; in fact some asset owners demand that their asset managers use one of them.

However, it should be noted that relying on the estimated ESG data provided by these firms could constitute a breach of fiduciary duty.

That is to say, relying on data you can not validate or interrogate in order to satisfy a short-term reporting or regulatory requirement is not acting in the best interest of the investors that these funds truly serve.

๐Ÿฎ. ๐™๐™๐™š ๐™ฌ๐™ค๐™ง๐™™ '๐™š๐™จ๐™ฉ๐™ž๐™ข๐™–๐™ฉ๐™š๐™™' ๐™จ๐™ช๐™œ๐™œ๐™š๐™จ๐™ฉ๐™จ ๐™–๐™ฃ ๐™–๐™ฃ๐™–๐™ก๐™ฎ๐™จ๐™ฉ ๐™ข๐™ž๐™œ๐™๐™ฉ ๐™๐™–๐™ซ๐™š ๐™จ๐™ฉ๐™ช๐™™๐™ž๐™š๐™™ ๐™ฉ๐™๐™–๐™ฉ ๐™˜๐™ค๐™ข๐™ฅ๐™–๐™ฃ๐™ฎ ๐™–๐™ฃ๐™™ ๐™ž๐™ฉ๐™จ ๐™ž๐™ฃ๐™™๐™ช๐™จ๐™ฉ๐™ง๐™ฎ ๐™–๐™ฃ๐™™ ๐™ข๐™–๐™™๐™š ๐™–๐™ฃ ๐™ž๐™ฃ๐™›๐™ค๐™ง๐™ข๐™š๐™™ ๐™˜๐™ค๐™ข๐™ฅ๐™–๐™ฃ๐™ฎ-๐™จ๐™ฅ๐™š๐™˜๐™ž๐™›๐™ž๐™˜ ๐™š๐™จ๐™ฉ๐™ž๐™ข๐™–๐™ฉ๐™š.

In reality, although their precise methodology is typically opaque, the estimated value is just an average, calculated from that company's regional and sectoral peer group. That's why we call it a 'guesstimate'.

The example we give to investors is that it is like hiring an analyst after you were reassured that they got 70% in their final mathematics exam. You then learn that actually, they never showed up for that exam and this score was in fact a class average. Which leads onto the next key point:

๐Ÿฏ. ๐™„๐™ฉ ๐™ž๐™จ ๐™ฃ๐™ค๐™ฉ ๐™˜๐™ก๐™š๐™–๐™ง ๐™ฌ๐™๐™–๐™ฉ ๐™˜๐™ค๐™ข๐™ฅ๐™–๐™ฃ๐™ฎ ๐™™๐™–๐™ฉ๐™š ๐™ž๐™จ ๐™›๐™–๐™˜๐™ฉ๐™ช๐™–๐™ก ๐™–๐™ฃ๐™™ ๐™ฌ๐™๐™–๐™ฉ ๐™ž๐™จ ๐™š๐™จ๐™ฉ๐™ž๐™ข๐™–๐™ฉ๐™š๐™™.

Depending on the third party data provider you may be subscribed to, you can sometimes click through some of the data they have collected - for example, a company's CO2 emissions number.

But you won't know whether it is an actual value disclosed by the company, or a value estimated by the many analysts working for that ratings firm.

N๏ปฟo estimated data - no black boxes.

Here at Integrum ESG, we have always committed to never using estimated data and only providing a 'glass box' to our investor clients.

Our affordable, customisable and transparent ESG solution was built by investors with over 20 years of experience in equity research - therefore we understand the real dangers of using opaque data which is only updated once every so often.

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Carbon Offsets Crackdown

๐—ง๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐— ๐—ผ๐—น๐—น๐˜† ๐—™๐—ฟ๐—ฎ๐˜‡๐—ฒ๐—ฟ.

Last month, my colleagueย Hazel Cranmerย wrote a post on the issues of companies relying solely on carbon โ€˜offsettingโ€™ to reach decarbonisation goals.ย ย 

She argued carbon offsets fail to make genuine carbon reductions, and that we should instead invest in โ€˜carbon insettingโ€™; avoiding emissions at the source โ€œrather than being forced to clean them upโ€.โ€ฏย 

As the carbon market heads into turmoil following the recent announcement from Zimbabwe (, offset schemes have become more unreliable in achieving carbon neutral status.ย 

It has become apparent that this sentiment is widely shared, with both the EU parliament and UKโ€™s advertising watchdog proposing bans last week on adverts making โ€˜carbon neutralโ€™ product claims using offsets. ( &โ€ฏโ€ฏโ€ฏ.ย ย 

The crackdown comes as no surprise, given the seemingly endless cases of companies being exposed for greenwashing.ย 

Examples include the TotalEnergies lawsuit, who claimed their Thermoplus heating oil was carbon neutral through compensating for emissions via offsetting schemes in India and Peru, and the banning of Lufthansaโ€™s recent campaign declaring their green efforts (carbon offsets) were โ€˜protecting the worldโ€™s futureโ€™.ย 

๐—›๐—ผ๐˜„ ๐—บ๐—ถ๐—ด๐—ต๐˜ ๐˜๐—ต๐—ฒ๐˜€๐—ฒ ๐—ฝ๐—ฟ๐—ผ๐—ฝ๐—ผ๐˜€๐—ฎ๐—น๐˜€ ๐—ฎ๐—ณ๐—ณ๐—ฒ๐—ฐ๐˜ ๐˜๐—ต๐—ฒ ๐˜€๐˜‚๐˜€๐˜๐—ฎ๐—ถ๐—ป๐—ฎ๐—ฏ๐—ถ๐—น๐—ถ๐˜๐˜† ๐—น๐—ฎ๐—ป๐—ฑ๐˜€๐—ฐ๐—ฎ๐—ฝ๐—ฒ?

I believe we will see two changes:ย 

1. More accurate sustainable purchasing decisionsย 

Despite growing success in exposing dubious green claims, it is likely that many other companies make similar statements but evade consequences. The recent proposals should hopefully discourage such behaviour, prompting companies to either verify their claims or refrain from making them altogether. We should then, in theory, be able to trust what companies are advertising to us and make more accurate decisions on what we buy based on sustainability grounds.ย 

2. A shift towards carbon โ€˜insettingโ€™ย 

Apprehension of lawsuits could push companies towards more credible initiatives to substantiate their green claims. In essence, the crackdown should serve as a catalyst for companies to shift their reliance on feeble offsetting schemes and embrace more robust approaches in reducing the carbon footprint of their offerings.ย 

๐—œ๐˜€ ๐˜๐—ต๐—ฒ๐—ฟ๐—ฒ ๐—ฎ๐—ป๐˜† ๐˜‚๐˜€๐—ฒ ๐—ณ๐—ผ๐—ฟ ๐—ฐ๐—ฎ๐—ฟ๐—ฏ๐—ผ๐—ป ๐—ผ๐—ณ๐—ณ๐˜€๐—ฒ๐˜ ๐˜€๐—ฐ๐—ต๐—ฒ๐—บ๐—ฒ๐˜€ ๐—ถ๐—ป ๐˜€๐˜‚๐˜€๐˜๐—ฎ๐—ถ๐—ป๐—ฎ๐—ฏ๐—ถ๐—น๐—ถ๐˜๐˜† ๐˜€๐˜๐—ฟ๐—ฎ๐˜๐—ฒ๐—ด๐—ถ๐—ฒ๐˜€?

We at Integrum ESG do not include carbon offsets in calculating the carbon footprint of companies (as per GHG Protocol guidelines).ย ย 

However, investments in offsetting schemes should not be discouraged entirely. Not only do they contribute to the pool of climate financeย needed to reach international climate goals, but they also demonstrate a companyโ€™s dedication to global climate mitigation beyond their value chain; a policy valued by ESG ratings providers and investors.ย 

But what do you think?

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ESG Red Spikes #3 - Royal Mail (IDS.L)

๐—˜๐—ฆ๐—š ๐—ฅ๐—ฒ๐—ฑ ๐—ฆ๐—ฝ๐—ถ๐—ธ๐—ฒ๐˜€ ๐Ÿ“ˆ

๐—จ๐—ป๐—ถ๐—ผ๐—ป ๐—ฑ๐—ถ๐˜€๐—ฝ๐˜‚๐˜๐—ฒ๐˜€, '๐—ฃ๐—ผ๐˜€๐˜๐—ฎ๐—น ๐—ฑ๐—ฒ๐˜€๐—ฒ๐—ฟ๐˜๐˜€' & ๐—ฅ๐—ฒ๐—ด๐˜‚๐—น๐—ฎ๐˜๐—ผ๐—ฟ๐˜† ๐—ฎ๐—ฐ๐˜๐—ถ๐—ผ๐—ป

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐˜€๐—ฒ๐—ฒ?

Our Real-time ESG Tracker picked up growth in negative sentiment for Royal Mail (IDS.L), flagging numerous stories across the past week which correlated with falling share value.

Our systems immediately sent out an alert to our clients with Royal Mail in their portfolio.

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐—น๐—ฒ๐—ฎ๐—ฟ๐—ป?

In what seems to be a worrying trend for Royal Mail, with the company only earlier this year having threatened to declare insolvency, both investor and consumer confidence continues to be challenged - we were able to capture each different story early and flagged it to our clients.

๐—ช๐—ต๐—ฎ๐˜ ๐—ผ๐˜‚๐—ฟ ๐—ฅ๐—ฒ๐—ฎ๐—น-๐—ง๐—ถ๐—บ๐—ฒ ๐—˜๐—ฆ๐—š ๐—ง๐—ฟ๐—ฎ๐—ฐ๐—ธ๐—ฒ๐—ฟ ๐˜€๐—ฎ๐˜„

We have summarised the main stories which we captured across wider media and Twitter for you below:

๐Ÿ—“๏ธ ๐—ง๐˜‚๐—ฒ๐˜€๐—ฑ๐—ฎ๐˜† ๐Ÿต๐˜๐—ต ๐— ๐—ฎ๐˜†

Reports begin to filter through that Royal Mail CEO, Simon Thompson, is set to announce his departure from the company as a step to finally resolve a long running dispute with the Communication Workers Union (CWU).

Share price for IDS.L had a high of 250.20 ๐Ÿ”ป to a low of 244.47. ๐Ÿ“ˆ

๐Ÿ—“๏ธ ๐—ช๐—ฒ๐—ฑ๐—ป๐—ฒ๐˜€๐—ฑ๐—ฎ๐˜† ๐Ÿญ๐Ÿฌ๐˜๐—ต ๐— ๐—ฎ๐˜†

The story regarding the soon-to-be resignation of the Royal Mail CEO begins to spread throughout wider media.

Outsourcing firm and government contractor Capita, whose systems are used to administer pensions for the Royal Mail amongst other organisations, reveal it will take a hit of around ยฃ20m from a recent cyber attack that saw some customer, supplier and colleague data accessed by hackers.

Share price for IDS.L had a high of 246.62 ๐Ÿ”ป to a low of 232.8. ๐Ÿ“ˆ

๐Ÿ—“๏ธ ๐—™๐—ฟ๐—ถ๐—ฑ๐—ฎ๐˜† ๐Ÿญ๐Ÿญ๐˜๐—ต ๐— ๐—ฎ๐˜†

Reports that Royal Mail reportedly failing to frequently deliver post were causing dozens of areas to become โ€œpostal desertsโ€ - with some areas receiving letters as little as once a fortnight.

Share price for IDS.L had a high of 236 ๐Ÿ”ป to a low of 229.2. ๐Ÿ“ˆ

๐Ÿ—“๏ธ ๐— ๐—ผ๐—ป๐—ฑ๐—ฎ๐˜† ๐Ÿญ๐Ÿฑ๐˜๐—ต ๐— ๐—ฎ๐˜†

It is widely reported that the UK regulator Ofcom has launched an investigation into Royal Mailโ€™s failure to meet its delivery targets in the past year - and will fine the company if it cannot reasonably explain why it missed the targets.

Share price for IDS.L had a high of 229.13 ๐Ÿ”ป to a low of 224.9. ๐Ÿ“ˆ

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Bonuses for underperforming CEOs

๐—ง๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐—๐—ฎ๐—ฐ๐—ธ ๐— ๐—ผ๐—ฟ๐—ฝ๐—ต๐—ฒ๐˜.

When CEOs of large public companies are receiving large wages and bonuses, should these bonuses be rewarded when there is a reduction in company value? Why should shareholders reward poor performance, and therefore reinforce misalignment?

A recent example of this is seen whenย Uber's
CEO Dara Khosrowshahi, was rewarded with a 146.9% increase on his $2 million bonus (on top of his $24 million compensation package) in 2022 due to a vague โ€˜better-than-baseline company performanceโ€™ even though the company stock had fallen by 40% (

Alignment and executive pay ย 

One of the most important governance metrics (with the highest number of sub-metrics captured under this metric byย Integrum ESG) is Remuneration Alignment, which evaluates executive pay alignment with company shareholdersโ€™ interests.ย 

A long-standing issue exists (particularly in large public companies with many shareholders), where separation of ownership (shareholders) and control (managers/executives) leads to a loss of alignment with the ownersโ€™ interests, often now called โ€˜the agency problemโ€™.

Executive pay in large public companies can be a controversial topic due to leviathan compensation packages, which are used to combat the agency problem, keeping interests aligned with performance-related remuneration goals and long-term incentives that are of importance to the company, usually containing key performance indicators (KPIs).

Many KPIs are increasingly focused on ESG targets such as aiming for net zero by 2050, in line with the Paris Agreement.ย 

Will things change?

Ultimately, the responsibility of executive pay and alignment is down to the Remuneration Committee on the board.

Theย U.S. Securities and Exchange Commissionย adopted a Pay Versus Performance disclosure rule in August last year. This makes it mandatory for US companies to disclose the relationship between executive compensation actually paid compared to the financial performance of the company.ย 

It is clear that remuneration alignment is building in importance for regulators and shareholders alike, particularly when considering the desired transparency they expect from corporates and fund managers.

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ESG Red Spikes #2 - MillerKnoll (MLKN)

๐—˜๐—ฆ๐—š ๐—ฅ๐—ฒ๐—ฑ ๐—ฆ๐—ฝ๐—ถ๐—ธ๐—ฒ๐˜€ ๐Ÿ“ˆ

๐—–๐—˜๐—ข๐˜€, ๐—•๐—ผ๐—ป๐˜‚๐˜€๐—ฒ๐˜€ & "๐—ฃ๐—ถ๐˜๐˜† ๐—–๐—ถ๐˜๐˜†"

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐˜€๐—ฒ๐—ฒ?

Our Real-time ESG Tracker picked up a significant negative red spike forย MillerKnollย (MLKN), starting by flagging one of the first tweets made about the controversy.

Our systems immediately sent out an alert to our clients with MillerKnoll in their portfolio.

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐—น๐—ฒ๐—ฎ๐—ฟ๐—ป?

MillerKnoll CEO, Andi Owen, came under fire after a video was released of her scolding her employees for complaining about not receiving bonuses - advising them to "leave pity city" and focus on making money for the company.

This was even though she herself had made almostย $1.2 million in bonuses in the previous year,ย as part of a pay package worth nearly $5 million.

These comments had ramifications on public sentiment and their share price.

๐—ช๐—ต๐—ฎ๐˜ ๐—ผ๐˜‚๐—ฟ ๐—ฅ๐—ฒ๐—ฎ๐—น-๐—ง๐—ถ๐—บ๐—ฒ ๐—˜๐—ฆ๐—š ๐—ง๐—ฟ๐—ฎ๐—ฐ๐—ธ๐—ฒ๐—ฟ ๐˜€๐—ฎ๐˜„ ๐Ÿšฉ

The video was first leaked on Twitter on Friday 14th April just past midnight (GMT).

Our Real-Time ESG Tracker then immediately caught this tweet and all further tweets and articles relating to it.

The number of stories peaked on the 19th April, being reported on via many mainstream media sources and forcing the CEO to come out and apologise.

Since that initial story, the share price of MillerKnoll has continued to fall and has brought the issue of executive pay and bonuses back into the limelight.

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ESAs' proposed Changes to SFDR

๐—ง๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—–๐—˜๐—ข ๐—ฆ๐—ต๐—ฎ๐—ถ ๐—›๐—ถ๐—น๐—น.

The EU regulators (ESA) have just proposed a set of revisions to the SFDR (Sustainable Finance Disclosure Requirement).

The consultation closes July and 2 law firms we have spoken to estimate any changes would come into legal effect in Jan 2024.

๐—›๐—ฒ๐—ฟ๐—ฒ'๐˜€ ๐—ฎ ๐˜€๐˜‚๐—บ๐—บ๐—ฎ๐—ฟ๐˜† ๐—ผ๐—ณ ๐˜๐—ต๐—ฒ ๐Ÿฑ ๐—ธ๐—ฒ๐˜† ๐—ฝ๐—ผ๐—ถ๐—ป๐˜๐˜€ ๐—ณ๐—ฟ๐—ผ๐—บ ๐˜๐—ต๐—ฒ ๐Ÿญ๐Ÿฑ๐Ÿด-๐—ฝ๐—ฎ๐—ด๐—ฒ ๐—ฐ๐—ผ๐—ป๐˜€๐˜‚๐—น๐˜๐—ฎ๐˜๐—ถ๐—ผ๐—ป ๐—ฝ๐—ฎ๐—ฝ๐—ฒ๐—ฟ:

1๏ธโƒฃ The number of mandatory PAIs (indicators that funds making sustainable investments will have to report to) will be increased from 14 to 18.ย ย 

The new 4 are 'Social' indicators, relating to the companies the fund invests in:

๐Ÿšฉ Revenue earned in countries which don't co-operate with the EU on tax

๐Ÿšฉ Involvement in production of tobacco

๐Ÿšฉ Whether the company tries to block trade unions

๐Ÿšฉ % of staff earning less than an adequate wage

2๏ธโƒฃ If the fund has an emissions reduction objective, it must publish quantified details.

3๏ธโƒฃ More disclosure will be required on a fund's EU Taxonomy alignment (bringing SFDR and the Taxonomy closer together).

4๏ธโƒฃ The requirement for a company to 'do no significant harm' to certain EU environmental and social objectives - if it is to classify as a 'sustainable investment' - will be more precisely defined (with quantified 'thresholds' to limit fund managers' discretion).ย ย 

5๏ธโƒฃ The regulatory disclosures that fund managers have to publish (Annexes II-V) will have a summary dashboard at the front, designed for non-professionals to understand.

๐—™๐—ผ๐—ฟ ๐—ฎ๐—ป ๐—”๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐Ÿด ๐—ณ๐˜‚๐—ป๐—ฑ, ๐—ถ๐˜ ๐˜„๐—ถ๐—น๐—น ๐—ฐ๐—ผ๐—ป๐˜๐—ฎ๐—ถ๐—ป ๐Ÿฑ ๐—ธ๐—ฒ๐˜† ๐—ฏ๐—ผ๐˜…๐—ฒ๐˜€:

๐Ÿšฉ What 'environmental and social characteristics' are promoted by the fund (max 250 characters)

๐Ÿšฉ What % of the fund's investments are sustainable

๐Ÿšฉ What % of the fund's investments are Taxonomy-aligned

๐Ÿšฉ Does the fund consider the PAIs

๐Ÿšฉ If the fund supports an emissions reduction target, what is the total % reduction targeted, and by what year

๐—ช๐—ต๐—ฎ๐˜ ๐—ฐ๐—ผ๐—ป๐—ฐ๐—น๐˜‚๐˜€๐—ถ๐—ผ๐—ป๐˜€ ๐˜€๐—ต๐—ผ๐˜‚๐—น๐—ฑ ๐˜„๐—ฒ ๐—ฑ๐—ฟ๐—ฎ๐˜„ ๐—ณ๐—ฟ๐—ผ๐—บ ๐˜๐—ต๐—ฒ๐˜€๐—ฒ ๐—ป๐—ฒ๐˜„ ๐—ฝ๐—ฟ๐—ผ๐—ฝ๐—ผ๐˜€๐—ฎ๐—น๐˜€?

๐Ÿ’ญ The SFDR compliance headache is not going away:ย 

The EU seems determined to keep 'raising the bar' for any fund marketing itself as 'sustainable'.

๐Ÿ’ญ Investors' need for agile software that can keep up with increasing disclosure requirements is going to increase.

๐Ÿ’ญ Our argument about ๐€๐ซ๐ญ๐ข๐œ๐ฅ๐ž ๐Ÿด+ (linked here) gets stronger:

If a fund wants to be labelled Article 8 without reporting to the PAI, it will have to publish a front page 'dashboard' every quarter, that says "This product did not make sustainable investments" and then "This product did not consider the most significant negative impacts of its investments on the environment and society" (the regulator wants this wording to replace 'PAIs', to make it clearer).

Which will surely make any investor think "๐˜ต๐˜ฉ๐˜ช๐˜ด ๐˜ง๐˜ถ๐˜ฏ๐˜ฅ ๐˜ฎ๐˜ช๐˜จ๐˜ฉ๐˜ต ๐˜ฉ๐˜ข๐˜ท๐˜ฆ ๐˜ข๐˜ฏ ๐˜ˆ๐˜ณ๐˜ต๐˜ช๐˜ค๐˜ญ๐˜ฆ 8 ๐˜ญ๐˜ข๐˜ฃ๐˜ฆ๐˜ญ, ๐˜ฃ๐˜ถ๐˜ต ๐˜ช๐˜ต ๐˜ช๐˜ด ๐˜ฏ๐˜ฐ๐˜ต ๐˜ช๐˜ฏ ๐˜ข๐˜ฏ๐˜บ ๐˜ฎ๐˜ฆ๐˜ข๐˜ฏ๐˜ช๐˜ฏ๐˜จ๐˜ง๐˜ถ๐˜ญ ๐˜ธ๐˜ข๐˜บ ๐˜ข ๐˜ด๐˜ถ๐˜ด๐˜ต๐˜ข๐˜ช๐˜ฏ๐˜ข๐˜ฃ๐˜ญ๐˜ฆ ๐˜ง๐˜ถ๐˜ฏ๐˜ฅ".

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EDCI reporting with Integrum ESG

The ESG Data Converge Initiative (EDCI) was created to provide GPs & LPs with a set of universal ESG data points for all of their PortCos.

Using Integrum ESGโ€™s innovative Direct Entry Model, any GP can easily collect the data needed from their PortCos to submit to the EDCI.

Just send a link to your PortCo - when they have submitted the data, you can see it in the โ€˜EDCIโ€™ tab on our Dashboard.

All mandatory 11 metrics will be listed and any scores will be colour coded to alert you to any data point which may require your attention.

You can then export all of this information and send it directly to the EDCI.

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Carbon โ€˜Insettingโ€™ : Advocating for Prevention over Clean Up

๐—ง๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐—›๐—ฎ๐˜‡๐—ฒ๐—น ๐—–๐—ฟ๐—ฎ๐—ป๐—บ๐—ฒ๐—ฟ.

Carbon offsetting has been a hot topic in sustainability discussion circles for years and is viewed by many as a vital, if not the sole, option for some companies meeting their net-zero targets.ย Unless they plan on a complete product shift, Oil and Gas companies will almost entirely rely on offsetting. But how effective is it, and is it our only path forward?

Carbon offsetting is a process of compensating CO2 emissions by investing in external initiatives that actively reduce or remove GHG emissions. In practice, this looks like companies investing in reforestation or renewable energy projects, or simply buying trade-able carbon credits.

The calculated negative emissions associated with these projects (e.g. the carbon captured by newly planted trees) is presented as negating the positive carbon emissions resulting from a companyโ€™s business activities.

While offsetting projects can create genuine sustainable outcomes, they are not without criticism. They are seen by many as an attractive quick fix to achieve a clean conscience and present an illusion of sustainable practices to consumers and investors.

Disney, Shell and Gucci have all been caught up in recent backlash following a Guardian investigation into the leading carbon offsets certifier, Verra. The research concluded that more than 90% of their rainforest offset credits were worthless โ€œphantom creditsโ€ failing to make โ€œgenuineโ€ carbon reductions. Ultimately, it opens all Verra users up to greenwashing allegations.

At Integrum ESG, we follow guidance from the GHG Protocol and do not include Carbon offset figures when evaluating a companyโ€™s carbon footprint or when we compare their performance to their sector peers. We do this to effectively communicate the real climate change and reputational risk associated with these emissions and potential carbon inefficiencies in their business activities. Not only that, but climate commentators predict legal scrutiny and regulation to hit the $2bn voluntary carbon market in the near future.

Newly coined carbon โ€˜insettingโ€™ challenges a reliance on offsetting. It advocates a proactive approach to tackling carbon emissions within a companyโ€™s supply chain. Ultimately, it aims to avoid producing emissions at the source rather than being forced to clean them up.

While it is a new buzzword, itโ€™s not a new concept and many companies have already embraced โ€˜insettingโ€™ initiatives. Examples weโ€™ve found at Integrum ESG include Nestleโ€™s commitment to sustainable farming practises resulting in improvements in biodiversity while reducing water consumption and GHG emissions.

Decarbonisation of a companyโ€™s supply chain is clearly the more demanding path to net-zero but it is overwhelmingly the preferred course of action.
Ultimately,ย carbon offsets should be used as a supplement to cross the net-zero finish line rather than the instrument we rely on to take us the whole way.

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ESG Red Spikes #1 - Pinduoduo (PDD)

๐—˜๐—ฆ๐—š ๐—ฅ๐—ฒ๐—ฑ ๐—ฆ๐—ฝ๐—ถ๐—ธ๐—ฒ๐˜€ ๐Ÿ“ˆ

๐—š๐—ผ๐—ผ๐—ด๐—น๐—ฒ ๐˜€๐˜‚๐˜€๐—ฝ๐—ฒ๐—ป๐—ฑ๐˜€ ๐—ฃ๐—ถ๐—ป๐—ฑ๐˜‚๐—ผ๐—ฑ๐˜‚๐—ผ ๐˜€๐—ต๐—ผ๐—ฝ๐—ฝ๐—ถ๐—ป๐—ด ๐—ฎ๐—ฝ๐—ฝ

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐˜€๐—ฒ๐—ฒ?

Our proprietary Real-Time ESG tracker picked up a significant negative red spike forย 
Pinduoduo(PDD), which has continued to rise throughout the day.ย ย 

Our systems immediately sent out an alert to our clients with Pinduoduo in their portfolio.

๐—ช๐—ต๐—ฎ๐˜ ๐—ฑ๐—ถ๐—ฑ ๐˜„๐—ฒ ๐—น๐—ฒ๐—ฎ๐—ฟ๐—ป?

Google has suspended Pinduoduo, one of Chinaโ€™s most popular e-commerce platforms, from its Play Store.

It has been suggested that versions of the app were found to include malware, exploiting zero-day exploits to hack users.

While this accusation has been rejected by a spokesperson of the Chinese company, the app has been suspended from the Play Store while an investigation continues and users of the app have been warned and prompted to uninstall.

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Inflation Reduction Act - weapon against climate change or protectionism?

๐—ง๏ปฟ๐—ต๐—ถ๐˜€ ๐—ฎ๐—ฟ๐˜๐—ถ๐—ฐ๐—น๐—ฒ ๐˜„๐—ฎ๐˜€ ๐˜„๐—ฟ๐—ถ๐˜๐˜๐—ฒ๐—ป ๐—ฏ๐˜† ๐—œ๐—ป๐˜๐—ฒ๐—ด๐—ฟ๐˜‚๐—บ ๐—˜๐—ฆ๐—š ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐—ž๐—ถ๐˜ ๐— ๐—ฎ๐—ฟ๐—ธ๐˜€.

Signed into law in August 2022, the Inflation Reduction Act (IRA) has been hailed as โ€œthe most significant climate legislation in U.S. historyโ€ according to the US Environmental Protection Agency (

The main intention of the IRA is to catalyse investment in clean energy: the act itself includes $370b of energy-related spending; two of the main beneficiaries of this will be clean energy and electric vehicle (EV) companies.ย ย 

The funds are to be delivered through tax incentives, grants, and loan guarantees. According to McKinsey, US solar, wind, heat pumps and EV industry all stand to gain from production and investment tax credits of $30 billion for manufacturing (ย 

W๏ปฟe looked into 4 companies that are starting to benefit from the IRA:

๐—ง๐—ฒ๐˜€๐—น๐—ฎ - On 22nd February, Tesla announced a shift inย cell production from Germany to the US after considering incentives available through the IRA, making it one of the first firms to declare a strategy shift prompted by the law. [1]

๐— ๐—ฒ๐—ฟ๐—ฐ๐—ฒ๐—ฑ๐—ฒ๐˜€-๐—•๐—ฒ๐—ป๐˜‡ ๐—š๐—ฟ๐—ผ๐˜‚๐—ฝ - Mercedes are now in the process of building 10,000 fast-charging points in North America from 2023, targeting 2,500 charging points at 400 locations across most U.S. states and Canada by 2027. [2]

๐—Ÿ๐—ถ๐—ป๐—ฑ๐—ฒ - According to a recent Reuters report, Linde has estimated the total investment opportunity for the company in the United States alone could exceed $30 billion over the next decade. [3]

๐—™๐—ถ๐—ฟ๐˜€๐˜ ๐—ฆ๐—ผ๐—น๐—ฎ๐—ฟ - The company has recently announced a big expansion, planning to invest up to $1.2 billion in scaling production of American-made photovoltaic (PV) solar modules. The investment is forecast to expand the companyโ€™s ability to produce American-made solar modules for the US solar market to over 10 gigawatts (GW) by 2025. [4]

๐—ง๐—ต๐—ฒ ๐—ฟ๐—ฒ๐—ฎ๐—ฐ๐˜๐—ถ๐—ผ๐—ป ๐—ณ๐—ฟ๐—ผ๐—บ ๐˜๐—ต๐—ฒ ๐—˜๐—จ ๐—ฎ๐—ฐ๐—ฟ๐—ผ๐˜€๐˜€ ๐˜๐—ต๐—ฒ ๐—ฝ๐—ผ๐—ป๐—ฑ ๐—ต๐—ฎ๐˜€ ๐—ฏ๐—ฒ๐—ฒ๐—ป ๐—น๐—ฒ๐˜€๐˜€ ๐—ฒ๐—ป๐˜๐—ต๐˜‚๐˜€๐—ถ๐—ฎ๐˜€๐˜๐—ถ๐—ฐ.

European officials have complained that the IRA; which โ€“ amongst other things - limits tax credits to EVs assembled in the United States, and violates U.S. commitments not to subsidise domestic industries or discriminate against foreign ones.ย ย 

There are genuine fears that it could lure businesses away from the bloc with generous tax breaks - and there is no smoke without fire.ย ย 

The CEO of Enel in December publicly claimed the IRA is more efficient than EU aid to support domestic production of energy sector components.ย ย 

The response by the European Commission has been to unveil its Green Deal Industrial plan, signifying a potential relaxation of state aid towards clean tech, although this is struggling to get ubiquitous support among all member states.ย  The EU has warned against a subsidy race but has welcomed the commissionโ€™s response to the IRA.

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Guesstimated Data - Yes or No?

T๏ปฟhis is a post made by our CEO Shai Hill on LinkedIn on 10th March 2023.

The large legacy ESG ratings brands use a vast amount of estimated data.

That's how they are able to cover >10,000 companies, including emerging market companies that don't actually publish any ESG data.

There are 3 problems here:

  1. ๐—ง๐—ต๐—ฒ๐˜† ๐—ฑ๐—ผ๐—ป'๐˜ ๐—บ๐—ฎ๐—ธ๐—ฒ ๐—ฐ๐—น๐—ฒ๐—ฎ๐—ฟ ๐˜„๐—ต๐—ฎ๐˜ ๐—ฐ๐—ผ๐—บ๐—ฝ๐—ฎ๐—ป๐˜† ๐—ฑ๐—ฎ๐˜๐—ฎ ๐—ถ๐˜€ ๐—ฎ๐—ฐ๐˜๐˜‚๐—ฎ๐—น ๐—ฎ๐—ป๐—ฑ ๐˜„๐—ต๐—ฎ๐˜ ๐—ถ๐˜€ ๐—ฒ๐˜€๐˜๐—ถ๐—บ๐—ฎ๐˜๐—ฒ๐—ฑ.

Depending on your subscription, you can sometimes click through to a CO2 emissions number, but you won't know whether it is an actual value disclosed by the company, or a value estimated by that ratings firm.

  1. ๐—ง๐—ต๐—ฒ ๐˜„๐—ผ๐—ฟ๐—ฑ '๐—ฒ๐˜€๐˜๐—ถ๐—บ๐—ฎ๐˜๐—ฒ๐—ฑ' ๐˜€๐˜‚๐—ด๐—ด๐—ฒ๐˜€๐˜๐˜€ ๐—ฎ๐—ป ๐—ฎ๐—ป๐—ฎ๐—น๐˜†๐˜€๐˜ ๐—บ๐—ถ๐—ด๐—ต๐˜ ๐—ต๐—ฎ๐˜ƒ๐—ฒ ๐˜€๐˜๐˜‚๐—ฑ๐—ถ๐—ฒ๐—ฑ ๐˜๐—ต๐—ฎ๐˜ ๐—ฐ๐—ผ๐—บ๐—ฝ๐—ฎ๐—ป๐˜† ๐—ฎ๐—ป๐—ฑ ๐—ถ๐˜๐˜€ ๐—ถ๐—ป๐—ฑ๐˜‚๐˜€๐˜๐—ฟ๐˜† ๐—ฎ๐—ป๐—ฑ ๐—บ๐—ฎ๐—ฑ๐—ฒ ๐—ฎ๐—ป ๐—ถ๐—ป๐—ณ๐—ผ๐—ฟ๐—บ๐—ฒ๐—ฑ ๐—ฐ๐—ผ๐—บ๐—ฝ๐—ฎ๐—ป๐˜†-๐˜€๐—ฝ๐—ฒ๐—ฐ๐—ถ๐—ณ๐—ถ๐—ฐ ๐—ฒ๐˜€๐˜๐—ถ๐—บ๐—ฎ๐˜๐—ฒ.

In reality, although their precise methodology is typically opaque, the estimated value is just an average, calculated from that company's regional and sectoral peer group. That's why we call it a 'guesstimate'.

As I warn investors, it's like hiring an analyst after you were reassured that they got 70% in their final mathematics exam. You then learn that actually, they never showed up for that exam and this score was in fact a class average.

You can surely appreciate that if they had sat the exam, their score might have been very different from 70%.

3๏ปฟ. ๐—” ๐˜€๐—ฒ๐—ฟ๐—ถ๐—ผ๐˜‚๐˜€ ๐—ฝ๐˜‚๐˜€๐—ต๐—ฏ๐—ฎ๐—ฐ๐—ธ ๐—บ๐—ถ๐—ด๐—ต๐˜ ๐—ฏ๐—ฒ ๐—ฏ๐—ฒ๐—ด๐—ถ๐—ป๐—ป๐—ถ๐—ป๐—ด ๐—ณ๐—ฟ๐—ผ๐—บ ๐—ฎ๐˜€๐˜€๐—ฒ๐˜ ๐—ผ๐˜„๐—ป๐—ฒ๐—ฟ๐˜€.

These are the institutions who ultimately own the capital that asset management firms invest (on their behalf).

Many asset owners trust the large legacy brands in ESG ratings; in fact some demand that their asset managers use one of them.

But many never realised how many of the 'reassuring' grades they review each quarter are based on guesstimated data.

Within the UK, some asset owners (public pension fund trustees) are even receiving advice that relying on estimated ESG data might constitute a breach of fiduciary duty.

W๏ปฟhat do we think?

We only use company-disclosed data behind any fundamental analysis we do - and if the company hasn't disclosed data that a recognised framework like the SASB Standards would expect to be disclosed, we make that clear and mark the company down for it.

Many of you might disagree that this is the best approach. But if you are going to use estimated data - you should at least know it's estimated data.

๐—•๐˜‚๐˜ ๐˜„๐—ต๐—ฎ๐˜ ๐—ฑ๐—ผ ๐˜†๐—ผ๐˜‚ ๐˜๐—ต๐—ถ๐—ป๐—ธ? When reviewing ESG data and scores for a company, do you see estimated ESG data as necessary gap filling?

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Scope 3 & Scope 4 emissions

Scope 3 emissions make up a large portion of total emissions, yet are under-reported. ย 

For context, approximately 85% of the largest 2,000 companies we cover disclose their GHG emissions, but of these companies only around 60% disclose a breakdown which also includes scope 3.

Even when reported, there are issues with how complete the scope 3 disclosure is, with some companies only disclosing on a few of the 15 GHG protocol categories.ย 

Many LPs and investors doubt the value of scope 3, and the two main criticisms arose during the โ€˜27 years to Net Zero, are we on track?โ€™ panel at the PEI Responsible Investment Forum last week:ย 

(1) Scope 3 calculations are crude estimates at best โ€“ there is no such thing as measured scope 3.

(2) The double, triple, quadruple accounting problem at the fund level.ย The example given at the conference was a good one; jet fuel emissions. ย 

These could be counted in the scope 1 of the airline operating the flight, the scope 3 of any company whose employees are taking the flight for business, or the scope 3 of the company who refined the jet fuel.ย ย 

The SEC recently signalled they were scaling back their ambitious disclosure requirements on scope 3 [1], however some disclosure will be required under the newย IFRS
ย S2 standards [2]. So, there is mixed opinion from standard setters/regulators.ย 

Scope 4 (measuring avoided emissions) [3] is of growing interest to LPs who take climate investing very seriously; climate funds should invest in companies with technologies/approaches that will reduce global emissions significantly, with the acknowledgement that those companies are often in โ€˜unattractiveโ€™ industries like Steel, or Cement.โ€ฏ

Calculating their Scope 4 will reveal their positive impact - but again, estimations will play a large role in their quantification.

R๏ปฟead our Head of Research Hannah Bennett's thoughts here.

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Press Release - Integrum ESG x Malk Partners

Effective today, Integrum ESGโ€™s industry-leading data, scoring, and benchmarking is integrating with the preeminent ESG advisory services of Malk Partners.

More and more, top-tier private market clients tell us they want ESG data and analysis that is accurate, framework-aligned, and comparable. The partnership will deliver exactly that, through a software-and-services pairing aimed at supercharging the ESG performance of portfolio companies.

โ€œWe are very excited to be working with Malk, which has been a first mover and leader in the ESG advisory space since its founding in 2009,โ€ said Shai Hill, CEO and Founder of Integrum ESG. โ€œBy combining Malkโ€™s preeminent advisory services with our industry-leading repository of public and private company ESG data, we can become even more valuable to our private market clients.โ€

โ€œOur clients have been very clear. They want the best ESG data available โ€“ by which they mean, ESG data that is seamlessly and accurately captured, intuitively displayed, scored in a customizable way, benchmarked against industry peers, and consistent with widely-respected ESG frameworks. In Integrum ESG, we have found the innovative partner that best aligns to our clientsโ€™ needs,โ€ said Max Hong, CEO of Malk Partners.

Above all else, client satisfaction is our highest priority, and we are excited about the ways Malkโ€™s field-leading advisory services will complement Integrum ESGโ€™s unmatched data capabilities.

We now look forward to serving top-tier private market investors together.

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What does a 100% SFDR Article 9 fund look like?

P๏ปฟlease note these are the 12 largest positions only - you can see all 100 holdings by either filling in the form HERE or by requesting the full list via

We recently created a post on LinkedIn explaining how regulators in the EU, UK and US are investigating ESG funds as there have been growing concerns that asset managers are promising more than they can deliver in an effort to sell their products.

There are fears that to meet the growing demand for ESG products many asset managers have simply rebranded their existing products rather than trying to create new ones, which has created concerns around greenwashing.

A recent analysis by PwC showed that of 1,061 Article 9 funds -- whereby a product needs to have sustainability as its โ€œobjectiveโ€ -- showed that only 286 were new.ย ย The rest were reclassifications of existing funds.

A probe of Article 9 products by Swedish authorities last month found โ€œmany casesโ€ in which managers failed to provide necessary information, and as a result the Stockholm based regulator has warned that it will act to stamp out false ESG claims.

Furthermore - the EC has recently announced guidelines suggesting that the hurdle for an Art 9 fund should be 100% which has prompted firms like Amundi and Blackrock to remove Article 9 labels from some of its funds.

This has prompted the team here at Integrum ESG to use ourย 'Screener Tool'ย to create an Article 9 fund whereย everyย company meets the 12 specific sustainability objectives that a company must support if it is to be compatible with an Article 9.

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Integrum ESG Awarded "Best Global AI-Powered ESG Data Provider"

We are happy to have been recognised as the "Best Global AI-Powered ESG Data Provider" byย Corporate Vision Magazineย in their annual Artificial Intelligence Awards.

This recognises the incredible work done by the Integrum ESG Machine Learning team.

Their contribution cannot be understated - creating and refining our cutting edge models so that they are able to capture, verify and display granular and relevant ESG data with unrivalled rapidity.

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Airlines Not on Track to Meet Carbon Emissions Targets - Updated

N๏ปฟOTE: This table has been updated as of 29 September 2022, following the news of easyJet switching from a strategy of carbon offsetting to emission reductions.

Below is a list of the top 9 airline companies with the biggest difference between their Awareness Score and their Performance Score - i.e, they have policies and targets in place but they are still the worst performing airlines relative to their peers in the airline industry in terms of CO2e emissions.

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Countries which are worst at managing Climate Change Risk

The below table shows the countriesย which are worst at managing risks from climate change.

T๏ปฟhe Climate Change Risk metric includes two sub-metrics:

1๏ปฟ. Vulnerability vs readiness for a changing climate whichlooks at a country's propensity to be impacted by climate change hazards vs its ability to make effective use of investments for adaptation.

2๏ปฟ. Demographic Pressures which considers pressures upon the state deriving from the population itself or the environment around (including pressures stemming from extreme weather events).

T๏ปฟhis metric is scored from 0-4 with 4 being the highest score awarded.

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Companies which do not have a policy in place to protect the environment

The below table shows the companies within the Chemical sector that do not have a policy in place to protect the environment.

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The top 10 companies with the largest year on year increase of CO2 emissions.

The table below shows, from highest to lowest, the top 10 companies which have seen the largest year on year increase of CO2 emissions.

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SFDR: The Comply or Explain Mechanism

Question related to Regulation (EU) 2019/2088 of the European Parliament (Sustainable Finance Disclosure Regulation 2019/2088)

Published by the European Commission 14/07/2021:

The โ€œcomply or explain mechanismโ€

The underlying objective of Article 4 of Regulation 2019/2088 is to encourage financial market participants to pursue more sustainable investment strategies in terms of reducing negative externalities on sustainability caused by their investments. The compliance with disclosure requirements under Article 4 should incentivise the interest in investing in activities that do not harm environment or social justice, curb greenhouse gas emissions of their investments, stimulate investee companies to transition away from unsustainable activities and improve their environmental impacts or and even induce portfolio adjustments and divest from investments in activities that are harmful to sustainability. Article 4 also encourages financial advisers to pay more attention to how the consideration of negative externalities is integrated in their investment or insurance advice.

This is why the โ€œcomply or explain mechanismโ€ under Article 4(1) of Regulation 2019/2088 distinguishes between โ€˜principal adverse impactsโ€™ and โ€˜adverse impactsโ€™.

Whilst the โ€œcomply mechanismโ€ under point (a) of paragraph 1 encompasses the consideration of principal adverse impacts of investment decisions, financial market participants that decide not to apply the โ€œcomply mechanismโ€, must under point (b) of that paragraph that establishes โ€œexplain mechanismโ€, provide clear reasons for why they do not consider โ€˜adverse impactsโ€™ of investment decisions on sustainability factors. Under point (b), by way of example, financial market participants must provide clear reasons for why they do not consider degradation of the environment or social injustice caused by their investments.

The aim of Article 4(3) and (4) of Regulation 2019/2088 is to introduce a more stringent โ€œdisclosure mechanismโ€ and reduce a hypothetical incidence of application of โ€œexplain mechanismโ€.

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SFDR Simplified : A Guide

New regulation comes into force in January 2023, called โ€œSFDRโ€ (Sustainable Finance Disclosure Regulation) - settingย out rules for asset managers to classifyย and reportย on sustainability and ESG factors in investments.

This regulation applies to all investment managers and advisors (a) in the EU, (b) should they have EU-based shareholders, and/or (c) if they are marketing within the EU.ย 

Moreover, the FCA regulator in the UK opened a consultation on its own version, called โ€œSDRโ€, in November 2021. So even if you plan to market your fund in the UK, and not the EU, you are going to have to meet the requirements.

We have summarised how these new rules could apply to YOU and what steps you should take to best prepare yourself - in a comprehensive but digestible guide below.

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The truth behind the ยฃ1 CEO salary

Below is a list of the top 10 companies (with remuneration reports) with the largestย 'limit on long-term bonuses as a percentage of base salary (%) 'ย -ย i.e. the potential size of a CEO bonusย ~~can be~~ย in comparison to their salary.

The universe is companies that disclose salary and bonus % AND have a remuneration report showing the numbers

The companies not on this list may have larger bonus sizes inย absoluteย values, this table focuses on potential bonus as % of salary

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The Financial Institutions that are worst at integrating Sustainability concerns

Of the 314 companies weย have under full coverage in the sub-sectors of: Commercial Banks, Asset Management & Custody Activities, Insurance, Investment Banking & Brokerage - i.e. the financial subsectors where "Integrating social & environmental concerns into planning & design" is material we have found that the below 9 companies do not clearly disclose sufficient policies for the metric "Integrating social & environmental concerns into planning & design". In the case of these sub-sectors, this could refer to integrating ESG or sustainable finance strategies into their products, for example.

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The Best and the Worst Extractives & Minerals Processing Companies

The below list shows the ESG scores of the top 10 and worst 10 extractives & minerals processing companies.

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Auditing suppliers' labour code of conduct in the processed food sector

The below table shows the companies within the processed food sub-sector and their awareness scores for auditing their suppliers' labour code of conduct. Most score a 3 out of a possible highest score of 4 as our scoring logic gives a score of 3 for companies withย a policy in place for conducting labour audits of suppliers and for disclosing numbers, but does not give detailed percentages or set itself a target.

Only one company has scored a maximum score of 4 as they have also set themselves a target for conducting labour audits of suppliers.

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How different sub-sectors score on labour relations

The table below ranks each sub-sector from highest to lowest on how they manage labour relations.

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Chile has become the first country to release a SLB Bond

Chile have issued a new USD$2bn 20-year sustainability-linked bond (SLB), the first Sovereign to do so. Unlike green bonds, the proceeds of SLBs are not segregated for use towards specific green or sustainable projects, but instead the payout to investors depends on whether the issuer meets agreed-upon KPIs. The KPIs attached to Chile's SLB are related to their annual greenhouse gas emissions and renewable energy generation.

On theย Integrum ESG Sovereign Dashboard, compared toย its Latin America & Caribbean peers, Chile ranks no1 on overall ESGย and sits within the top 3 on Social and Governance. However, the country is 7th on Environmental issues, due to factors such as water stress, waste and % of power coming from renewable sources

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Could your firm get sued for its ESG claims?

Last week the influential ratings firm Morningstar stripped its 'Sustainable' label off c1,600 funds (1 in 4), and said there will be more downgrades to come.

A huge number of these funds had already declared themselves to beย Article 8ย (an SFDR categorisation that means ESG has been integrated into the investment process). Morningstar however has criticised theseย funds that โ€œplace themselves into Article 8โ€ฆsay they consider ESG factors in the investment processโ€ฆbut donโ€™t integrate them in a determinative way for their investment selectionโ€.ย 

To qualify as Article 8, a fund must not just establish and declare certain ESG policies, it must assess each holding in the fund according toย 14 โ€˜Principal Adverse Indicatorsโ€™. It's a detailed process, and the vast majority of self-declared Article 8 funds areย not doing this at all.

Morningstar is just a ratings firm - but there are 2 far more concerning developments:

Regulators have had enough of these exaggerated claims.

The EU markets watchdog, ESMA, said it will create a legal definition of โ€œgreenwashingโ€ and classify it as a type of mis-selling. When a financial regulator creates a new definition, it is invariably because they intend to weaponize it.

The FCA said back in July that many ESG funds โ€œoften contain claims that do not bear scrutinyโ€. This was perhaps an early warning, and penalties will follow.

The SEC is investigating DWS for possible false ESG claims on some of its funds. This shows that even in markets where sustainability is not being promoted, nor is it clearly defined, regulators are already willing to pursue unsubstantiated ESG claims as a form of mis-selling.

Investors may start to sue.

- Consider this warning from the partnership at Baker McKenzie in Los Angeles, that if people have lost money, โ€œyouโ€™ll see plaintiffs step in. Youโ€™re hearing the rumblings. Itโ€™s not happened that much yet. But it will.โ€

- Simmons & Simmons in London cites cases brought by shareholders against operating companies, on ESG grounds, and the FT quotes its partner Robert Allenโ€™s warning โ€œyou can definitely see how (a case against fund managers) can follow onโ€.

- North Wall Capital, which funds legal class actions, offers the alarming quote โ€œit is certainly comingโ€.

What might this mean? It means that a $10bn fund, that has underperformed its benchmark by 2%, and whose advertised claims that it is โ€˜sustainableโ€™ are later deemed to be misleading, could face a $200m class action claim from its investors.

Might a clear legal standard of โ€˜sustainableโ€™ emerge? The law firm Bates Wells believes that the 2015 Paris Climate Accord will be the legal standard โ€“ and the recent court ruling against Shell in The Hague set this as a legal precedent. How many investment funds are using a tool like THIS to evidence that their investments are consistent with a global warming scenario โ€˜well below 2 degreesโ€™ (which is the objective of the Paris Climate Accord)?

So, ESG regulatory risks and legal liabilities may be mounting for fund management firms. Theย easiest wayย for any fund management firm to mitigate these risks is to state clearly that environmental and social objectives are not promoted by the fund, nor is ESG analysis systematically integrated into the investment process. Then all these mis-selling risks fall away.

It just seems that, fearful of losing investors, very few fund management firms want to do this.

Theย alternativeย is for these firms to build, or subscribe to, data tools that will map their funds to the Paris Accord, assess them against the 14 SFDR Adverse Indicators, and enable them to explain the key ESG risks in every existing investment.

How can Integrum ESG help meet theseย challenges?

- Fund managers are often relying on ESG ratings they cannot understand. When a regulator or investor asks "why are you comfortable with the ESG performance of this company?" they will struggle to answer, because the ESG score that has reassured them is a set of black boxes. The Integrum ESG dashboard presentsย glass boxes, with the reason for every score, for every metric, and the underlying data thatย explains and supports the ESG rating.

- Applying a Cambridge University model, the Integrum ESG dashboard calculates the extent to which your fund isย aligned to the Paris Climate Accordย - and surfaces the data that supports this calculation, company by company.

- The latest Integrum ESG dashboard feature, soon to be deployed, will provide the evidence of why, or why not, your fund can be classified as Article 8. It will map and assess the alignment of every uploaded fund to theย SFDRย Principal Adverse Indicators, and theย EU Taxonomyย Objectives.

Do you want to learn more about how Integrum ESG can help you meet these challenges? If so, CLICK HERE.

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Processed Food companies that are best at managing health risks to customers

Recently we posted a poll on LinkedIn (which you can see HERE) which discussed how the plant-based meat market will develop and the main reasons why there has been a drop in the sales of plant-based meat in 2021.

One of the main reasons for this drop in sales is that consumers have now started to realise that many plant-based meats are highly processed, additive-laden and not very healthy.

This has prompted the team here at Integrum ESG to take a look at Processed Food companies that are best at managing health risks to customers.

See below for a list of the 14 companies that rank highest out of the highest possible score of 4.

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Countries that are best at managing risks from climate change

Below is a list of countries that are best at managing the risks associated with climate change. Each scores 3.75 out of a maximum score of 4

The Climate change risk metric has 2 sub-metrics. The qualitative "Vulnerability vs readiness for a changing climate", and the quantitative "Demographic pressures".

The first sub-metric in particular (vulnerability vs readiness) assesses how the country is managing the risk from climate change, so for example, seeing the small island state of Mauritius on this list might be surprising, but they are deemed to have a high readiness to adapt to risks they are facing from climate change.

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Companies that are best at managing physical risks from climate change.

Last week The World Economic Forum released 'The Global Risks Report 2022', and of their 10 most severe risks on a global scale over the next 10 years, 5 were environmental risks.ย 

These 5 risks are climate action failure, extreme weather, biodiversity loss, human environmental damage and natural resource crises.ย 

The list below is the top 20 companies who score highest on managing business risk from climate change.

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Which automobile companies are best at managing risks?

The below tables shows which 14 automobile companies score highest on the governance metric 'Risk Management'.

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Companies with the Best Governance Score

The list below shows the 12 companies with the highest Governance score. Integrum ESG licences the Minerva framework to assess corporate governance. Minerva are stewardship experts and their framework assesses corporate governance using 9 metrics and 39 sub-metrics.

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Countries with the highest & lowest freedom of the press score

In the table below, we show the 5 countries which rank highest and lowest on the Freedom of the Press Index. This 2021 data is an annual ranking of countries (the greater the index score, the worse the situation is regarding press freedom) published by Reporters Without Borders and is one of the 31 datapoints we track for every Sovereign in our ESG database.

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Countries with the highest & lowest unemployment rates

In the table below, we show the 5 countries where unemployment is lowest and highest. This 2020 data is sourced from the International Labour Organization, and is one of the 31 datapoints we track for every Sovereign in our ESG database.

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Companies where ESG sentiment is falling fast

Below is a list of the companies with theย sharpest deterioration inย ESG sentiment from the past seven days. Our A.I. powered sentiment tracker trawls through ~850,000 global news sources, inย 92 languages, and assigns a neutral, negative or positive sentiment score to ESG relevant comments.

The companies below are experiencing an acute deterioration in ESG sentiment for different specific reasons, such asย ransomware attacks,ย undisclosed CEO perks and even a US Senator calling for an investigation into price fixing in theirย sector.

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Companies Addressing Obesity Risks - The Best of

With the recent 'rise in child obesity' article published by the BBC (data taken from the NHS), we have highlighted the UK Food & Beverage companies that are most focused on managing health risks to customers. You might be surprised by some of the names below.

The UK companies below (with a score of 3) state that their procedures related to managing customer health risks eitherย align with a third-party standard, or are audited. The companies with a score of 4ย alsoย have a target in place, for supporting customer health.

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Most Improved ESG Scores - The Top 10

How do companies improve their ESG rating? It might be by reducing carbon emissions, it might be by adopting new employee policies. But it is very often achieved by betterย disclosureย on ESG issues.ย 

Below is a list of the top improvers when it comes to (uncustomised) ESG score improvements.ย 

We are now seeing a clear trend of improving ESG disclosure in the US โ€“ and thus it is no surprise that all but 2 of this list are US companies.

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Happy Places to Work - The Top 10

Using the SASB framework, we assess certain sectors for employee turnover - as an indicator of how good a company's labour practices are.

Rather than focus on the negative, we thought we would list below the 10 companies with theย lowestย staff turnover:

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Incentivising the Accountants - The Worst 10

The list below shows the 10 companies who pay their accountants the most, relative to the cost of auditing from the accountants.

For example, Volkswagen paid EY โ‚ฌ19m in audit fees, but it paid EY โ‚ฌ33m in non-audit fees (โ‚ฌ21m for tax advisory, โ‚ฌ7m for advice on new legal standards, and โ‚ฌ5m for 'other assurance services').

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Biggest Emission Reducers - The Best of

The Top 10 companies with the biggest YoY GHG Emission reductions

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