Analyse a Firm

Explore how improving 8 key ESG variables could raise the valuation of over 2200 firms worldwide

Why an Engagement Maximiser?

Improving material E, S or G practices can boost shareholder value. The intuition is simple: stronger ESG means more resilient corporates, which financial markets price accordingly.

The Engagement Maximiser identifies which E, S or G improvement(s) could raise shareholder value most for each firm.

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Company XYZ

Potential Shareholder Value Gain Associated with Adopting Peers’ Best Practices
Environmental Social Governance

Best Peers

This functionality is accessible to ESG for Investors Partners only. Please contact us if you would like to partner with us.

Disclaimer: The Engagement Maximiser only uses quantitative data, and thus may show a limited view of a company’s ESG performance. It may not capture all financially material ESG issues, especially for certain sectors. A different approach to ESG metrics may lead to contrasting results. The data represent a snapshot in time and may be inaccurate. The use of the Engagement Maximiser should therefore always be supplemented by in-depth company research.

The Engagement Maximiser involves five steps:

1. Select a firm

You can search for a firm using the search bar.

Is a firm you are interested in not covered? Please do not hesitate to reach out.

2. Visualise potential shareholder value gains

The graph shows the potential increase in shareholder value associated with adopting peers’ best practices for each ESG variable [the technical appendix defines ESG variables and “peers”].

3. Select the most material ESG variables

ESG variables with the highest potential for increasing shareholder value offer a short-list for further analysis.

4. Complement with in-depth company analysis

Like all quantitative models, our tool offers a simplified view of firms’ ESG performance. Hence, investors should perform supplementary company analysis to obtain a more accurate estimate of how much shareholder value might be added by improving the short-listed ESG variables. Occasionally, we expect an in-depth company analysis to reveal that some ESG variables flagged by our tool are not relevant for that company.

5. Engage

Persuade company management, its board and other shareholders to create shareholder value by adopting peers’ best practices.

Our tool allows identifying peers with best practices. Analysing these peers can point companies to actionable solutions. To identify peers, select underneath the graph the ESG variable you are interested in assessing and click on your preferred scope: sector & region or industry globally. We define “Peers” are firms in the same sector (GICS level 1) and region; or in the same industry (GICS level 2) globally (see Technical Appendix). Some “peers” will be more relevant than others for each firm. Investors should therefore use the “peers” list as a menu to select from.

The “Best Peers” functionality is accessible to ESG for Investors Partners only. Please contact us if you would like to partner with us.

General Approach

Which ESG aspects should investors prioritise in their engagement? There are numerous ESG variables (Refinitiv alone lists about 500). Improving them all at once would be unworkable. We therefore suggest that investors prioritise ESG improvements that raise shareholder value the most.

We estimate how eight key E, S and G variables influence firm valuation (see list below). We selected ESG variables that meet four criteria: variables that are numerical (and hence better-suited for econometric modeling), with good data coverage, relevant for financial markets and intuitively material for corporates.

These eight variables can have a significant impact, which varies across sectors.

Sieve of ESG variables

We use the model to estimate how much shareholder value can be created by improving each ESG variable. More precisely, the tool quantifies the potential gain associated with adopting peers’ best practices for each ESG metric.

Our dataset covers 2220 firms from the MSCI All Country World Index (MSCI ACWI).

Definitions

  • “Peers” are firms in the same sector (GICS level 1) and region; or in the same industry (GICS level 2) globally.
  • “Best practice” is typically a peer group’s 10th percentile for an ESG metric. However, best practices for Board tenure and Board size have their own definitions. For Board tenure, we use an optimal period of nine years as suggested by academic literature. For Board size, we use the 25th percentile to mitigate distortions caused by smaller (often family-controlled) firms, which tend to have smaller boards.
List of ESG variables