Gaining a Competitive Advantage with ESG Data for Student-Managed Investment Funds

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, 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 Data Services. The head of the library department suggested they contact Market Intelligence regarding additional capabilities.

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 Trucost that has been assessing 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.  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.

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 more.

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.