Many investors are likely to find that conducting fundamental analysis on environmental, social, and governance (ESG)-related issues can be quite a daunting task – especially given the massive amounts of variables that may be considered relevant.
To address this concern, certain data-driven companies and organizations have been working to establish more advanced technological tools and scoring systems to aid in the effort.
For example, firms such as FactSet-owned Truvalue Labs and Refinitiv may employ artificial intelligence, with sentiment analysis algorithms, and natural language processing, to arrive at a picture of a company’s ESG profile to help determine whether it aligns with – or adheres to practices that are against – an investor’s own personal values.
However, while the evolution of data science has enabled a treasure trove of information investors may use in their fundamental assessments, issues such as the need for increased corporate transparency and accountability seem to have grown – or at the least made more accessible to users by the information presented by Big Data.
Moreover, defining “ESG” appears to be a challenge in itself, amid the absence of a standard, global framework, with a unified set of reporting requirements, regulatory rules and associated incentives for compliance.
In a recent IBKR-hosted webinar “ESG Investing: How Big Data Helps Drive Financial Decisions,” panelists Elena Philipova, global head of ESG at Refinitiv, Shirley Birman, quantitative researcher at Truvalue Labs, Ari Zoldan, CEO of Quantum Research Group, and Edward Soffer, ESG manager at IBKR, each agree that the practice of ESG investing will likely continue to evolve, along with technology. However, to remove the risks of deceptive ESG practices, including greenwashing, a more concerted, global regulatory response will most likely be required.
Until then, it seems that the classic message of “caveat emptor” (buyer beware) will likely continue to prevail with respect to ESG investment decisions.
To experience the full webinar presentation “ESG Investing: How Big Data Helps Drive Financial Decisions,” register for free and watch the recording here.
And to learn more about ESG investing at no cost, take a full educational course at IBKR Trader’s Academy here.
Disclosure: Interactive Brokers
The analysis in this material is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IBKR to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.