US fund manager leads ESG “Super Factors” project with managers, asset owners and research houses

Project Delphi will feed into broader review by major European CSR groups.

State Street Global Advisors (SSGA), one of the world’s biggest fund managers, has teamed up with two of Europe’s biggest corporate sustainability organisations to front a collaboration with asset owners, research houses and fund managers to test which ESG “super-factors” can add long-term corporate value and how they can be measured. SSGA, which runs more than $2 trillion for institutional clients, is leading the investor segment, titled Project Delphi, of a broader collaborative review led by CSR Europe and EABIS (The Academy of Business in Society) called “Valuing Non-Financial Performance”. Project Delphi, which is being sponsored by Rick Lacaille, SSGA’s Global Chief Investment Officer, is looking to identify what it calls ESG “Super Factors” that investors think can most likely influence corporate profits over time. Its goal is then to work out how these super-factors can be measured and factored into the investment approaches of institutional investors. The global ESG market is estimated at $11.4 trillion, but forecast to rise to $25 trillion by 2015. However, SSGA says Project Delphi seeks to overcome a lack of consensus between investors on ESG criteria, which is holding ESG back by making it difficult for asset managers to build collective investment vehicles that appeal to the broad market. The project, which is currently building up its associations, comprises three workstreams: one forasset managers lead by Chris McKnett, Head of ESG at SSGA, a second looking at key performance indicators (KPIs) lead by Ralf Frank, Managing Director with DVFA, the Society of Investment Professionals in Germany and Delegate for ESG with the European Federation of Financial Analysts Societies, and a third stream for asset owners lead by Frank Curtiss, Head of Corporate Governance at Railpen Investments, the UK pension fund for the rail industry. The first stream of about 12 of Europe’s largest asset managers will agree on a short-list of material “super-factors” before submission to the second working group to define the agreed metrics for their measurement. The asset owner group will then “validate and amend” the findings of the two previous work-streams. Project Delphi will feed into the CSR Europe/EABIS review exploring the relationship between companies’ financial and non-financial performance to develop a European framework for improved company and investor dialogue. It seeks to demonstrate links between a wide range of environmental, social and governance factors and the financial performance of business through core non-financial value drivers, such as human capital, innovation and corporate governance. It is one of a number of collaborative “laboratories” launched as part of the European Alliance for Corporate Social Responsibility with strong backing from the European Commission.
Colleen Fletcher, Director, Membership Services at CSR Europe will be talking about the “Valuing Non-Financial Performance” programme at RI’s ESG Europe conference on October 4/5 in Amsterdam
Link to conference details