Citi, Goldman and SocGen top for ESG research commissions, says EAI

ESG research improves and develops into new areas despite market turbulence.

Citigroup, Goldman Sachs and Société Générale have been named as outstanding providers of investment research on extra-financial issues (EFIs) such as environmental, social and governance (ESG) concerns by the Enhanced Analytics Initiative (EAI). The EAI brings together buy side firms and asset owners to directly reward the best ESG research with a portion of their brokerage commissions.
The 30-member EAI initiative collectively owns or manages around €2 trillion (US$3trn) of assets.
Now in its eighth year of evaluation, the EAI also commended CA Cheuvreux, Oddo Securities, Credit Suisse, JP Morgan and UBS for their research. The EAI said the quality of extra-financial reporting continued to improve despite the current market turbulence, which some had predicted could see a drop off in the importance of extra-financial research.
Swiss investment consultancy onValues, assessed reports from a total of 22 research providers on behalf of the EAI. It said climate change and related EFIs still dominated research coverage, but that the information was becoming increasingly sophisticated with a number of research houses exploring such themes as thecomplex links between climate change and water scarcity. Coverage of corporate governance factors also continued to grow, it said, while evaluation of human capital management issues such as ageing workforces, health and safety and employee job satisfaction, was rising as a topic of investment relevance.
The evaluation highlighted developments in EFIs being used as additional input to company fair value calculations. Examples, it said, include a European utilities report that quantified the financial impact of political risks and a specific company broker report that explicitly calculated the reduction in net present value of the company’s pension scheme liabilities arising from changes in mortality forecasts.
In terms of sectors, the EAI said there had been a decline in coverage of industry groups such as automobiles and components and energy and utilities. Conversely, coverage of capital goods and materials has increased as high energy prices bring energy supply and efficiency technologies into sharper focus. But it said large-cap sectors such as financials and health care and key issues such as corporate governance still do not receive sufficient coverage relative to their importance.