Bloomberg has thrown its hat into the ring in the race to become the dominant provider of sustainability data and ratings, launching its first in-house ESG scores for investors.
The financial titan – whose namesake, Michael Bloomberg, chairs the Taskforce on Climate-related Financial Disclosures, through which more than 1,000 organisations have agreed to report on climate risk – will begin by scoring Oil & Gas firms on environmental and social performance, and will assess thousands of companies’ board composition.
The environmental and social scores will initially cover 252 companies in Oil & Gas, because of the sector’s systemic role in climate change, and because “there is typically stronger disclosure data from these companies”, Bloomberg said in a statement. Data will be used to assess performance on areas including climate change and health & safety, and firms will be compared with industry peers.
Reflecting an increasing focus by investors on board composition, the governance scores will be centred on the boards of more than 4,300 companies across multiple industries, looking at how well they are positioned to provide diverse perspectives and supervision of management, and how well boards rank relatively on diversity, tenure, over-boarding and independence.
Last month, RI revealed that Moody’s Video Eiris would make its ESG ratings free and public, following similar announcements from MSCI and Sustainalytics. Several data houses and researchers, including FTSE Russell and ISS ESG, already offer some of this information for free.
The trend comes as the industry faces increasing pressure over the lack of coordination and consistency in ESG ratings offered by different providers. There are calls for a single standardised access point for information, and concerns about the quality of primary research. There are also efforts to make ESG data free, so that organisations can cheaply and easily comply with the increasing levels of regulation around sustainability.
Many of the recent announcements, including today’s move from Bloomberg, relate to top-level ESG scores, rather than the more contentious field of ESG data itself. Bloomberg says its boardroom scores are based on a quantitative model “designed by Bloomberg governance specialists” and based on Bloomberg’s own management and board-level data. The assessments are based on existing sustainability and industry frameworks, it said, although it did not elaborate.
Investors will be able to see the scoring methodology and the company-reported data that informs the scores, it added.
“We see an opportunity to provide transparent and complete scoring methodologies along with the underlying data in order to support investment and finance professionals make informed decisions,” said Patricia Torres, Global Head of Bloomberg Sustainable Finance Solutions. “By providing transparent ESG data and scores, we are helping investors decode raw data that is otherwise hard to compare across companies. For corporates, these scores offer a valuable, quantitative and normalised benchmark that will easily highlight their ESG performance.”
The scores can be viewed via Bloomberg terminals.
In further evidence of the pile-in, UK-based financial information firm Defaqto today launched a new service providing “fund reviews” for ESG, saying “advisers need access to ESG data and fund/DFM research and providers need to be able to communicate and share the information with advisers”.
The reviews are based partly on “an interview process” with asset managers, and assessments cover: a fund’s ESG policy and its alignment with it; involvement with controversial activities; ESG integration; alignments with the SDGs; voting and engagement policies; and the level of ESG resources behind the fund.
“With regulatory changes requiring advisers to take ESG principles into account as a part of their suitability assessment, there need to be tools that make this easier,” said Defaqto’s Head of Insight and Consulting, Pan Andreas, adding the reviews were “just the start of things to come in terms of the tools we’ll make available to advisers in this area”.
And ISS ESG last week launched a “best-in-class” fund rating, based on the ESG performance of more than 20,000 investment funds from around the world. The service will rate funds from 1-5, using governance data, norms-based research, screens for energy and extractives, SDG impact assessments, carbon emissions data and voting records. Screens can also be applied to rule out companies by theme.
Marija Kramer, Head of ISS ESG, promised: “This new solution will provide a significant advantage over other offerings”.