This Week’s Tech and Tools News: ICE Extends ESG Reference Data, Plans Climate, Carbon Futures

ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including ICE, ISS ESG, Qontigo, Global Resilience Index Initiative, Intertrust, C8, Green Blue Invest, Trayport and IncubEx.

US-based data, technology and market infrastructure provider Intercontinental Exchange (ICE) has extended its ESG Reference Data coverage to include 3.5 million fixed income instruments. This includes corporate bonds, municipals, sovereigns and money markets across North America, Europe and Asia, and provides detailed ESG attributes and indicators that may be financially material, such as greenhouse gas emissions reported, board diversity, benefits and many others, sourced from company and publicly available third-party sources. The data set allows market participants to enhance their global equity and credit analysis by incorporating ESG-related metrics into their research and due diligence process, primarily sourced directly from corporate disclosures and other publicly available documents. ICE’s ESG Reference Data is available in a “user-friendly, customisable dashboard”, as well as via market standard feeds, that provides detailed access into the controversy metrics and ESG attributes about specific companies, securities and issuers. “ICE’s ESG reference data leverages the deep experience we have with fixed income instrument data and analytics and offers market participants a more complete view of ESG metrics,” said Anthony Belcher, Head of Sustainable Finance at ICE. “While much of ESG investing to date has been focused on equities, our offering allows users to assess risks and opportunities across multiple asset classes, all at the instrument level.” Separately, ICE also announced the planned launch of four new index futures contracts based on the MSCI Climate Paris Aligned Indices, expected to be available on ICE Futures US in January 2022, subject to regulatory approval. The firm also intends to introduce a nature-based solutions carbon credit futures contract, in Q1 2022, It will be traded and cleared by ICE in London and will physically deliver credits certified under Verra’s Verified Carbon Standard and Climate, Community and Biodiversity Standards Programs.

ISS ESG, the responsible investment arm of Institutional Shareholder Services, plans to launch a suite of solutions in Q1 2022 designed to help institutional investors to align their portfolios with commitments to reduce CO2 emissions to net zero by 2050. ISS ESG Net Zero Solutions’ Issuer Level Net Zero Alignment Data can be used to identify positive and negative performing companies against a range of individual climate-related metrics, while its Net Zero Portfolio Report creates an aggregated view of portfolio readiness for net zero, considering current and potential future emissions disclosure performance, fossil fuel exposure, potential future performance, climate mitigating revenue and target setting. ISS ESG Net Zero Solutions’ methodology for assessing alignment is focused on companies’ substantiated commitments to achieving Net Zero by 2050, as well as whether they have established interim targets, and have a decarbonisation strategy. Coverage will include 29,000 issuers for climate data, 23,000 issuers for energy and extractives data and 8,000 issuers for EU Taxonomy eligibility data, powered by data and insights from a broad range of high-quality research products within the ISS ESG universe.

Risk, analytics and index solutions provider Qontigo has introduced a Carbon Emission Price factor within its Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model. Designed to capture the investment risk of a global, regional or single-country portfolio through the lens of macroeconomic risk factors, the Macro Projection Model also “decomposes risks driven by interest rate, inflation and commodities”. The Carbon Emission Price factor is calculated by using the 1Y node from the Axioma Constant Maturity Futures Curve based on the European Carbon Emission Allowances futures traded on the European Energy Exchange, an auction platform within the EU Emissions Trading Scheme, supporting the energy transition and decarbonisation with a broad range of environmental products. “It’s critical for institutional investors to be able to get a clearer picture of the distribution of their risk based on macroeconomic exposures, including those driven by ESG-related factors,” said Melissa Brown, Global Head of Applied Research. “Our analysis shows the Carbon Emission Price factor is not significantly correlated with the other macro factors that exist in the Macro Projection Model, thereby giving investors more power to explain the contribution of risk from the Carbon Emission Price factor.”

The Global Resilience Index Initiative (GRII) was launched at COP26 to provide in-depth, accurate and timely open-source forecasting data on severe weather events such as floods to countries vulnerable to the impacts of climate change. Coordinated by Fathom, a UK flood mapping start-up formed at Bristol University, GRII is backed by a coalition of organisations which have provided partial funding and in-kind contributions. GRII aims to provide a globally consistent model for the assessment of resilience via high level metrics across the built environment, infrastructure, agriculture and societal exposures. It aims to help sectors across the global economy to quantify the value of building climate resilience and the costs of doing nothing, also enabling asset owners to compare portfolio risks across geographies and hazards. “Businesses, households, governments, and financial institutions globally urgently need this information to make better decisions, but it is in terribly short supply, especially in developing countries and emerging economies,” said Dr Ben Caldecott, Director of the UK Centre for Greening Finance & Investment and GRII Co-Chair.

Amsterdam-based Intertrust has unveiled an end-to-end ESG data solution for private fund managers which provides an integrated approach to collecting and analysing ESG data and managing ESG risk in their portfolios. Noting the traditional challenges of private capital firms with data management, Intertrust says the solution is designed to help general partners meet critical ESG-related demands, support outsourcing of data gathering and analytics, and evolve with regulatory and market demands. The new solution supports local currencies and metrics, ESG data management for illiquid assets, and ongoing updates to local carbon emissions factors. It also offers data validation features, removing potential formatting issues and ensuring clients can trust the insights and reporting produced by the solution. “The ability to effortlessly track, analyse, and learn from ESG data is paramount for investors and managers,” said Chitra Baskar, COO and Global Head of Funds and Product at Intertrust. “Our step-by-step solution provides private fund managers with the ESG insights they need to best manage their portfolios, via a single, intuitive platform alongside access to related tools and expertise.”

Direct indexing platform C8 has co-created an index that quantifies the quality of governance of the S&P 500 by combining its systematic long/short overlay with a Good Governance strategy developed by Green Blue Invest, a provider of ESG and impact products that align with UN Sustainable Development Goals. Annually rebalanced, Green Blue Invest provides C8 with the list of the top 100 of the S&P 500 companies in terms of quality of governance. The stock selection is based on Green Blue’s Stewardship model, a methodology that scores the quality of governance of S&P companies using systematic analysis of language processing. C8’s systematic risk premia overlay separates good governance alpha from market beta. Uncorrelated factors are used to position the long stock portfolio which is partially hedged through a short position in S&P futures. The index exhibits -3% correlation to the S&P Index and yields an average of 13.5% annualised return for a target volatility of 7.5%.

Energy markets platform Trayport is combining with Chicago-based IncubEx to launch a global voluntary carbon marketplace. Operated by IncubEx, the Voluntary Climate Marketplace (TVCM) will offer “best-in-class market access” to trade voluntary carbon offsets to stakeholders looking to meet net-zero commitments. The voluntary carbon offsets will be tradable through Trayport’s Joule platform, a global electronic trading solution for energy markets, providing market access to high-quality voluntary carbon offsets. IncubEx will leverage its extensive experience in establishing and growing environmental markets globally. By digitising the trading of carbon offsets, TVCM products will be accessible via Joule, offering market participants “a transparent and comprehensive view” of the global voluntary marketplace enabling brokers, buyers and sellers to transact offsets that meet their specific requirements for verified carbon reductions around the world. TVCM is expected to launch in the first quarter of 2022 and will initially support the trading of offsets from Gold Standard, Verified Carbon Standard (Verra), Climate Action Reserve and American Carbon Registry, which are voluntary offset standards and recognised by The International Carbon Reduction and Offset Alliance.

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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