State Street has boosted its portfolio of environmental, social and governance (ESG) offerings with the launch of ESGX, a new analytic tool designed to provide information to help clients bring transparency and standardisation to their ESG investing.
State Street has also reached an agreement with Arabesque, to complement its existing agreement with TruValue Labs, announced earlier this year. Developed by State Street Global Exchange, State Street's data and analytics business, ESGX will provide clients with a web platform through which they can assess ESG factor exposure in their portfolios, such as a company's carbon footprint, the type of labor used in a supply chain, and board diversity statistics.
Clients will also have the ability to review reports, which can be updated daily, that show how the ESG profile of a portfolio has evolved over time, according to John Plansky (pictured), global head of State Street Global Exchange.
'Having line of sight into a company's non-financial profile is increasingly important to the growing number of investors and regulators who understand the impact of ESG factors on risk and returns,' said Plansky. 'The root of firm valuation is the disclosure of relevant information, and it's critical that we bring new technologies to market that can provide added transparency for clients looking to better understand their investment portfolios through an ESG lens.'
Included in the new ESGX analytics platform, State Street's ESG Solutions business will offer Arabesque S-Ray, an algorithm-based technology that analyzes the sustainability performance of the world's largest listed corporations, using self-learning quantitative models and data scores as a risk management and compliance measure.
S-Ray works by systematically combining over 200 ESG metrics with news signals from over 50,000 sources across 15 languages. It is the first tool of its kind to rate companies on the normative principles of the United Nations Global Compact: human rights, labor rights, the environment, and anti-corruption (GC Score). Additionally, Arabesque S-Ray provides an industry-specific assessment of companies' performance on financially material sustainability criteria (ESG Score). Both scores are combined with a preferences filter that assesses a company's business involvements.
"ESG data provides a new dimension to investing, giving investors more information than ever before about the DNA of a company," said Andreas Feiner, head of ESG research at Arabesque.
'Investors want to perform well while being responsible, but they need access to ESG data to do that effectively,' said JR Lowry, head of State Street Global Exchange Innovation & Advisory Services. 'We're consistently hearing from clients that they need reliable ways to measure exposure to non-financial ESG factors. The combination of our ESGX analytic tool and these ESG data options will give them access to data and a range of insights that hasn't previously existed.'
Global ESG assets under management climbed to US$22.89tr in 2016, a 25% increase from 2014, according to Global Sustainable Investment Alliance 2016 Global Sustainable Investment Review. Yet according to a recent State Street study, while traditional obstacles to ESG investing are fading, the one significant barrier that remains is the lack of transparent, standardized and quality data. State Street Corporation has a dedicated structured products division responsible for creating structured investment products for State Street's institutional investor clients.
Photo: Business Wire