Christopher greenwald

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  • 1. ESG and Credit Risk
    Christopher Greenwald
    Head of ESG Content Strategy
  • 2. Agenda
    Introduction to ASSET4 ESG Data at Thomson Reuters
    Overview of ESG integration into Thomson Reuters
    Examination of ESG scores and CDS spreads
  • 3. Data Collection
    News Monitoring
    assetmasterExecutive
    Data Analysis
    Objective
    ESG Database
    assetmasterProfessional
    Fixed Income
    Carbon Data & Estimates
    Negative Screening
    ASSET4 ESG Data Sources and Products
    Annual
    Reports
    CSR
    Reports
    Company
    Websites
    News
    Sources
    NGO
    Websites
    Stock Exchange Filings
    3
  • 4. Economic
    Performance
    Environmental
    Performance
    Social
    Performance
    Corporate Governance Performance
    Pillars
    Categories
    More than 250 indicators (calculated from data point values)
    Indicators
    ESG Data and Framework
    Overall performance
    Company overview
    Link to public data sources (Raw Data)
    DataPoints
    More than 750 data points
    4
  • 22. Integrating ASSET4 Data into Thomson Reuters Products
    Thomson Reuters CreditViews on Eikon
    Ability to access ESG scores and integrate into credit analysis
    ESG Datafeeds
    Core feed of 23 levels of scoring
    Premium feed of 1000+ data items
    ESG in Datastream (Feb. 2011)
    Core package (120 items) on Datastream premium
    Upgrade with access to all data items
    Complete ESG data integration into Eikon (2011)
    5
  • 23. ESG Ratings and CreditViews
  • 24. ESG vs CDS Spread History
  • 25. Access to Environmental News
  • 26. ESG: a Proxy for Management Quality
    9
    According to an Issue of The McKinsey Quarterly:
    80% of CFOs and CIOs believe that ESG information can serve as a proxy for the quality of a company’s management.
    Source: The McKinsey Quarterly, Feb. 2009
  • 27. Average ESG Scores andCredit Downgrades/Upgrades
  • 28. Examination of ESG performance and CDS spreads
    CDS Spreads measure the cost of ensuring against default and the riskiness of a bond
    Examined the relationship between CDS spreads and ESG scores
    Segregated ESG performers into 4 quartile groupings
    2005-2007
    2008-present
    Hypothesis: Higher ESG performers should have lower CDS spreads
  • 29. CDS Spreads vs. ESG Performance 2005-2007
  • 30. CDS Spreads and ESG Scores 2008-present
  • 31. Dramatic Change in Average CDS Spreads 2005 - 2007
  • 32. CDS Spreads by ESG Score / Region 2005 - 2007
  • 33. CDS Spreads by ESG Score / Region 2008-present
  • 34. ESG/CDS Correlation by Geography 2005-present
  • 35. ESG / CDS Correlation by Pillar 2008-present
  • 36. ESG/CDS Correlation by Credit Rating
  • 37. Correlation ESG/CDS for US Companies 2008-present
  • 38. Conclusions
    ESG a positive signal for credit risk
    • Negative correlation with CDS spreads
    • 39. Signal strongest as rank correlation with US companies
    • 40. Best used to aid in a risk profile of the company
    Environmental and Social pillars showed most positive signals
    • Likely due to dramatic differences in disclosure and performance within regions
    ESG a stronger signal for companies with higher credit ratings
    • Short term financial risk less determinant of CDS spreads
    • 41. Useful in determining risks for companies with stronger risk profiles
    Can be useful as additional screening to financial analysis