S-Ray can empower investors to make better and more informed investment decisions while contributing to a more sustainable future. Clients of S-Ray across the global investment market include State Street, Deutsche Bank, the Government Pension Fund of Japan, AP1 and Eagle Investment Services (BNY Mellon). Four examples of ways investors use S-Ray are as follows:
Companies with a poor GC Score face increased reputational risk and the potential loss of their public license to operate. Likewise, low ESG scores indicate inferior performance, thereby allowing investors to take notice before the company is involved in a potential scandal. For example, Facebook, Volkswagen and Wells Fargo were screened out of Arabesque’s portfolio due to their low ESG scores. Through the daily update functions of S-Ray, investors can manage risk in real time, rather than solely depend on annual ESG updates provided by analysts.
Companies underperforming in terms of their ESG Score are also less likely to display future financial outperformance. Using data from Arabesque S-Ray, Pensions & Investments found that companies with high ESG scores outperform lower scoring peers. Significant involvement in activities that are not aligned with most investors’ personal values can further hinder companies from attracting capital. Arabesque S-Ray enables more informed long-term investment decisions, aiming to shift capital from the bottom corporate performers to the top.
Compliance and Reporting
As ESG becomes increasingly mainstream, policies are being implemented that require institutional investors to disclose their approach to ESG investing. In Sweden for example, institutional investors are now required to disclose their approach to ESG. In the Netherlands, investors without an ESG policy must explain why one is not in place. And in France, in addition to an ESG policy, investors’ contribution to climate goals must also be disclosed. By using S-Ray, investors can ensure that they comply with regulation requiring ESG integration and disclosure, as well objective, quantitative data to allow for clear ESG reporting.
Meet Demand for Values-Based Investing
With over 80% of millennials interested in sustainable investing, and an expected $24 trillion USD to be under control by millennials in 2020, demand for ESG products, strategies and integration is likely to continue to grow. In order to harness this growing market, investors using S-Ray can appeal to this demographic. Additionally, by having the data for the varying ESG features, as well as preferences filters, investors can create bespoke ESG portfolios that focus on specific issues.