In June 2010, I attended the Responsible Investor conference in New York City that was held at the offices of Bloomberg. With such sponsorship came a presentation by the Chairman of Bloomberg outlining their strategic decision to move into offering environmental, social and governance (ESG) information onto their terminals. It all sounded great, but as usual, there was an abundance of scepticism about it’s ability to profit from such a move! In the April 2011 Fast Company magazine, we get an opportunity to learn more about their decision to move in this direction and to learn how / if they are succeeding (see link below).
The article tells us about how Bloomberg’s Sustainability Director’s goal was to green it’s own operations. As they were looking at their competitors efforts in this field, they basically stumbled across the fact that no one was culminating all of this data for public use. This lead to them discovering the expanding field of financial analysis called “environmental, social and governance” or ESG. They noted that it was new but also realized that there was increasing evidence– and correspondingly, a growing belief amongst portfolio managers — that companies taking such factors into account are forward-thinking and well managed, and therefore, places investors should consider.
Curtis Ravenel, Bloomberg’s Sustainability Directors, highlights:
The biggest indicator in the ESG matrix right now is environmental impact. The financial community likes the E because it’s easy to quantify. And with E is the big C: carbon. And within that C is another C: cost. Some European countries, such as Sweden and Denmark, tax the carbon emissions of companies with offices there. The EPA’s rules to regulate CO2, which went into effect January 2nd, will effect many American balance sheets. If companies wake up one day to find it costs $15 to emit a ton of CO2, a financial analyst considering Exxon Mobile would see it emitted 128 million metric tons in 2009. That adds nearly $2 Billion to the oil giant’s operating costs — hardly extra-financial data.”
Bloomberg’s discovery clearly highlighting that the use of ESG data is becoming more and more mainstream in the capital markets. The question is, given every financial analyst has a Bloomberg terminal on their desk, are they using the data?
According to Bloomberg, they are offering over 100 indicators at no extra costs to users. “In the second half of 2010, 5,000 unique customers in 29 countries accessed more than 50 million ESG indicators via Bloomberg screens — a 29% increase over the first half of last year. We expect the trend to continue.” says Ravenel.
He goes on to say that recently, Goldman Sachs, Deutsche Bank, UBS, Merrill Lynch and Credit Swiss launched divisions to analyze ESG data from Bloomberg and its ESG competitors. ”We feel there is enough data out there now that we can place it on our platform in a variety of ways and from a variety of different vendors” says Bruce Kahn, senior investment analyst at Deutsch Bank Climate Change Advisors.
So as a corporation, a financial institution or a financial analyst, my question is to you… “are you ready?”. If not, do you have plans to get ready by either providing or using this information? This mega-trend of sustainability and sustainable investing is not going away anytime soon and more so, there’s money to be made by pursuing it.
The article goes on to offer some examples. Frank Mantero, Head of Corporate Responsibilty at GE says “the company has saved $150 million since 2005 by limiting its emissions.” Private equity firm KKR estimates that “eight of the companies in its portfolio pocketed $160 million of savings in two years after eliminating 345,000 tons of CO2 and 8,500 tons of wastepaper”. The examples of such discoveries are mounting as more and more companies move in this direction.
I always argue that in the end, this whole sustainability movement is about “competitiveness”. For those corporations who are willing to take a step in this direction, there are savings to be had and new opportunities to discover. For the banking/finance sector, there is a hugh trend happening globally and if you want to remain competitive with the large global players, you need to keep in step with this important trend. And finally, if you’re that lone financial analyst who actually makes the time to start looking at ESG issues in addition to your traditional economic issues, you’ll have a great chance to lead the pack of your competitors. It’s all there for your taking at this point. The question is… will you?