Student investment funds have become very popular at the business schools of many prominent universities to provide hands-on experience with the management and marketing of a live investment portfolio. This helps give students who are interested in pursuing careers in investment management, corporate finance, and related fields the opportunity to bridge theory and practice to hone their skills.
The lead faculty advisor for the fund at this top U.S. university wanted to provide students with an array of data and analytical tools that typically are used by professionals working in investment houses and large corporations. Given the growing prominence of environmental, social, and governance (ESG) issues and the rapid growth in sustainable investing, he also wanted students to be able to evaluate the ESG stance of companies before making decisions. He reached out to the head of the library department to see what was possible.
Pain Points
The lead faculty advisor for the student investment fund saw an opportunity to gain a competitive edge over other schools by introducing an array of new datasets and analytical tools to capture current thinking about investments. With more than half of the ESG-linked funds outperforming the S&P 500 in the first several months of 2021,1 he thought that adding an ESG dimension was very important. The advisor wanted to gain access to:
- Additional financial data and analytical tools to easily evaluate a portfolio, examine transactions, conduct comparable analysis, and more.
- Reliable ESG data to assess a company’s current performance and potential vulnerabilities from physical risks associated with natural disasters (e.g., hurricanes and floods) and transition risks associated with the move to a greener economy (e.g., carbon taxes).
This university is a twenty-year user of services from S&P Global Market Intelligence (“Market Intelligence”), including Compustat® Fundamentals that provides standardized global company fundamental and market data for active and inactive publicly-traded companies. This was being accessed through WRDS, a bulk data delivery option offered in partnership with Wharton Research
Student investment funds provide an important learning experience but, in today's market, their managers require essential financial data, robust ESG data, and analytical tools to gain a competitive edge to drive informed decision-making.
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The Solution
Market Intelligence mentioned numerous capabilities to take the investment analysis to a new level. This included an array of services offered by S&P Global Sustainable1, including Trucost products that include assessments of risks relating to climate change, natural resource constraints, and broader ESG factors since 2000. The overall solution set would enable users to:
Financial Analysis:
Leverage time-tested financial data
S&P Capital IQ Premium Financials provides standardized data for over 5,000 financial, supplemental, and industry-specific data items for over 150,000 companies globally.2 Data is available at numerous frequencies, along with point-in-time representations.
Gain sector intelligence
In-depth global data is available for 17 industries and there are also seven industry-specific financial statement templates.
Stay on top of organizational changes
Key Developments provides information on more than one million developments, based on over 160 standardized topics, including over 20,000 news sources, such as press releases and regulatory filings.
Review earnings calls
Transcripts review data on earnings, M&A activity, company conference calls, and special calls. The data also comes in a machine-readable format with metadata tagging.
Access powerful analytical tools
Screening and targeting tools help create customized lists of companies, transactions, securities, professionals, and more using quantitative or qualitative criteria. Users can also view auto-generated lists of trading and transaction comparables with proprietary algorithm-based Quick Comps and Transaction Quick Comps tools.
Portfolio Analytics provides insight into the investment process by transforming comprehensive fundamental and industry-leading data into powerful portfolio intelligence. Features include: portfolio reporting and monitoring, competitive analytics, custom dashboards, and much more.
ESG Analysis:
Evaluate the carbon intensity of a portfolio
Trucost Environmental Data covers 15,000 companies, and data can be integrated into Portfolio Analytics to:
- Evaluate a portfolio’s carbon footprint against benchmarks and peers.
- Understand the contribution of low- and high-carbon companies and sectors to a portfolio’s risk/return profile.
- Combine a range of environmental considerations with traditional equity factors for an enhanced view of portfolio performance.
- …and much more.
See if a company can absorb future carbon prices
Trucost Carbon Earnings at Risk Dataset can be used to stress test a company’s current ability to absorb future carbon prices and understand potential earnings at risk from carbon pricing at a portfolio level.
Delve into asset-level risks
Trucost Climate Change Physical Risk Analytics offers an asset-level approach to help understand the exposure of company-owned facilities and capital assets to seven climate-related physical impacts (i.e., flood, water stress, heatwave, cold wave, hurricanes, sea level rise, and wildfire) under different climate change scenarios. Scores at an asset basis can be aggregated to a company level.
Track progress on meeting the Paris Agreement goal
Trucost Paris Alignment Dataset assesses company-level alignment with the Paris Agreement goal to limit global warming to well below 2°C from pre-industrial levels.
Reviews scores for a company’s ESG performance
S&P Global ESG Scores is a dataset that provides scores at: (1) a company level (one overall ESG score), (2) for each of the three dimensions (E, S, and G), and (3) 23 criteria (e.g., biodiversity and raw material sourcing), with additional breakdowns below each criterion. Scores are prepared for 61 industries and are based on the S&P Global Corporate Sustainability Assessment (CSA) process, which is an annual evaluation of companies' sustainability practices.
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Key Benefits
Market Intelligence was able to offer an impressive line-up of capabilities, and both the head of the library department and the faculty advisor saw great value in being able to:
- Tap into an extensive amount of trusted data to gain a fuller picture of a company's businesses and performance.
- Stay on top of any financial restatements and adjustments that are made at later dates with point-in-time details.
- Utilize extensive pre-built tools to evaluate, monitor and visualize portfolios.
- Thoroughly assess a company's ESG performance and potential vulnerabilities to identify appropriate candidates for sustainable investments.
- Streamline workflows with analytical tools specifically designed for investment analysis, including the ability to identify a universe of trading comps using Quick Comps and Competitors to view peer groups for particular companies.
- …and much more.
The teams subscribed to the solutions to set up their net-zero roadmap. They will eventually use the information in internal credit risk models and as a guideline for the business as it helps with the transition to a green economy.
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1“Most ESG funds outperformed S&P 500 in early 2021 as studies debate why,” June 16, 2021, S&P Global Market Intelligence.
2All data as of January 2021.