This Week’s Tech and Tools News: Arabesque launches SFDR Tool for Managers

ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including Arabesque, Glass Lewis, Preqin, MSCI, Burgiss Group, ISS ESG and Moody’s ESG. 

Sustainable investment solutions provider Arabesque has unveiled a new digital solution designed to help investors meet disclosure requirements under the EU’s Sustainable Finance Disclosure Regulation (SFDR). Arabesque’s SFDR Data Solution is a toolkit developed for asset managers and investment professionals to ingest data needed for SFDR reporting, based on the Arabesque S-Ray regulatory methodology. The solution maps S-Ray’s suite of proprietary raw data metrics covering more than 4,000 entities to the 47 corporate-level principal adverse impact (PAI) indicators required by SFDR, resulting in over 120 S-Ray raw sustainability data indicators that can be delivered at an individual entity and portfolio-wide level. Covering all mandatory metrics as well as most opt-in indicators, Arabesque says the tool provides all the necessary data points for SFDR reporting. SFDR requires asset managers, financial advisers and insurance providers to disclose the sustainability credentials of funds and other investment products. Reporting via PAI indicators will be mandatory under Level 2 of SFDR from June 2022. “Sustainability is increasingly becoming a license to operate. Arabesque’s SFDR Data Solution provides asset managers with robust, accessible, and actionable datasets to address upcoming regulation,” said Dr Daniel Klier, President of Arabesque.

Separately, Arabesque has agreed strategic partnership with governance solutions provider Glass Lewis to provide sustainability intelligence for proxy voting and shareholder engagement to large corporates and investors. Under the deal, Arabesque will deliver company ESG profiles for Glass Lewis’ Proxy Paper research reports, enabling clients to gain the latest ESG data and insights on over 8,000 companies worldwide, and access to climate and regulatory data solutions. Using big data and a quantitative, algorithmic approach, Arabesque’s capabilities draw on more than four million ESG data points daily from over 30,000 sources for performance metrics on sustainability, including corporate net-zero alignment.

Alternative assets data provider Preqin has made some “major updates” to its ESG Solutions suite, which provides private market participants with a 360-degree view of ESG risk, impact and opportunity at portfolio and private company levels.  Preqin’sESG Solutions builds on its ESG Profiles – which covers ESG transparency KPIs, disclosures, and key contacts across more than 54,000 general and limited partners – to provide asset-level data on ESG risk and impact across 124,000+ private companies available on its Preqin Pro data and intelligence platform. The full suite of ESG Solutions gives access to ESG Profiles, comprehensive ESG transparency KPIs across 37,000+ GPs and 17,000+ LPs in alternative assets, including policies, practices, key ESG affiliation, memberships and contacts; ESG Risk Evaluations, risk magnitude scores down to the specific ESG factor for 124,000+ portfolio companies and 21,000+ funds; and Impact Assessments, estimates for positive impact potential across 124,000+ portfolio companies and 21,000+ funds and data for 50,000+ impact labelled portfolio companies and funds. “We have been developing and refining this solution for many months, including with the help of our ESG Council made up of global GPs, LPs, and academics representing £2.16 trillion in AUM. Together, we wanted to find answers to the biggest question in private markets — how do we correctly source asset-level private company ESG data? The support, feedback, and industry insights of the ESG Council has proven invaluable,” said Jaclyn Bouchard, Head of ESG at Preqin.

Data, analytics and research services provider MSCI and private capital specialist Burgiss Group are launching an analytical tool that enables asset owners and managers to better understand the impact of climate change on private asset portfolios. With emissions estimates for over 15,000 private companies and nearly 4,000 active private funds, the Carbon Footprinting of Private Equity and Debt Funds tool will support institutional investors, including those who have made public net-zero commitments, to assess climate-related risks holistically across asset types and align their private asset portfolios with global temperature targets. “The investors who power private assets — such as pension and sovereign wealth funds, endowments, and family offices — are increasingly expressing the need to know the carbon intensity of their portfolios and whether investments in unlisted assets are furthering their long-term strategies,” said Remy Briand, Global Head of ESG and Climate at MSCI. “This new tool is an important addition to our climate solutions toolkit and will help clients make better informed investment decisions in support of their transition to net-zero.” Carbon Footprinting of Private Equity and Debt Funds combines private company data from Burgiss, widely used by institutional investors for insight into private asset funds, with modelling developed by MSCI ESG Research for estimating corporate carbon emissions.

ISS ESG, the responsible investment arm of Institutional Shareholder Services, has launched a proprietary EVA Leaders Index Series to enable investors to integrate ESG criteria and financial materiality across leading global companies. The new tool identifies sector-leading companies using economic profit as measured by a company’s economic value added (EVA) margin, which converts accounting profit to economic profit by reversing accounting distortions and measuring profit after all costs. Constituent equities must also receive a medium or high ISS ESG Corporate Rating and comply with standards regarding international norms and controversial weapons to be eligible. Sector-leading companies within the new EVA Leaders Index Series currently include Apple, Air Liquide, JPMorgan Chase, TC Energy, Procter & Gamble, and American Tower, among others. Initial coverage spans three regions including the U.S., Europe, and developed markets. “By drawing on our deep well of proprietary financial measures such as EVA, industry leading sustainability ratings and research, and unrivalled extra-financial data, ISS ESG is delivering cutting-edge index solutions in keeping with our long-standing commitment to clients,” said Hernando Cortina, Head of Index Strategy at ISS ESG.

Moody’s ESG Solutions has launched EU Taxonomy Alignment Screening, a new data solution to help market participants meet the disclosure requirements of the EU Taxonomy regulation. Moody’s said the tool’s ‘ground-up’ construction ensures the underlying data is as closely aligned to the technical criteria of the EU Taxonomy as possible. Moody’s EU Taxonomy Alignment Screening provides users with comprehensive data across the key components of the regulation including: substantial contribution, do no significant harm and minimum social safeguards. Today, the screening covers all 100 of the activities outlined in the EU Taxonomy, and this will continue to expand as the regulation evolves to cover more environmental and social objectives. The new solution complements the SFDR PAI Dataset, which Moody’s released in June to help market participants meet the requirements of the EU’s Sustainable Finance Disclosure Regulation. “The responsible investment landscape is continually evolving due to new standards for disclosure practices and demand for ESG-labelled products,” said Sabine Lochmann, Global Head of Moody’s ESG Measures. 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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