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ESG and Credit Risk  <br />Christopher Greenwald<br />Head of ESG Content Strategy<br />
Agenda<br />Introduction to ASSET4 ESG Data at Thomson Reuters<br />Overview of ESG integration into Thomson Reuters<br />...
Data Collection<br />News Monitoring<br />assetmasterExecutive<br />Data Analysis<br />Objective<br />ESG Database<br />as...
Economic<br />Performance<br />Environmental <br />Performance<br />Social<br />Performance<br />Corporate Governance Perf...
Performance
Shareholders Loyalty
Employment Quality
Health & Safety
Training & Develop.
Diversity
Human Rights
Community
Product Responsibility
Board Structure
Compensation Policy
Board Functions
Shareholders Rights
Vision and Strategy
Resource Reduction
Emission Reduction
Product Innovation</li></ul>Categories<br />More than 250 indicators (calculated from data point values)<br />Indicators<b...
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Christopher greenwald

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Transcript of "Christopher greenwald"

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