Screen all Firms

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.

You can use the Engagement Maximiser to find firms where ESG improvement(s) have the highest potential for shareholder value creation.

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

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.

Using the Engagement Maximiser to screen firms involves five steps:

1. Select screens

You can screen the universe by selecting the region, sector and ESG theme.

Applicable screens

2. Visualise the potential shareholder value gains per ESG metric

The graph shows the potential gain associated with adopting peers’ best practices for each ESG metric [see technical appendix for a definition on ESG metrics and “peers”].

3. Select firm(s) and ESG issue(s)

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 supplemental company analysis to obtain a more accurate estimate of how much shareholder value might be added by improving the short-listed ESG variables. We expect in-depth company analysis to dismiss some short-listed ESG variables.

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, first go to the "Analyse a firm" page and select the firm for which you want to list the best-peers. Then, 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 functionality is available to all logged-in users.

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

Learn more

Working paper abstract