Frequently Asked Questions
What are the differences between ESG, SRI, impact investing, and divestment?
Environment, Social and Corporate Governance (ESG) and Socially Responsible Investing (SRI) are two ways of investing in public companies whose management is viewed to be socially responsible.
SRI usually refers to a mutual fund where the fund managers decide on certain values they want to pursue through their investments and build a portfolio based on those values. These mutual funds also usually focus on the values aspects of the companies before they focus on the investment upside of those companies.
ESG is a way of measuring companies’ risk that incorporates data about those companies’ social responsibility and corporate governance.
Impact investing usually refers to investing in private companies that align with one’s personal values, or to achieve a certain goal. Censible only incorporates data from public companies.
Divestment is the process of excluding certain industries or companies from an existing portfolio for ethical reasons. Censible offers customizable exclusionary screens based off of a number of controversial issues.
How does Censible view the ESG Data Landscape?
The concept of ESG data originates from Corporate Social Responsibility (CSR) Reporting as well as from exclusionary screens for Socially Responsible Investing (SRI). Older ESG data services generally have constructed their ESG methodology through a CSR lens. This type of methodology for building ESG factors relies significantly on information published by internal sustainability teams at companies, and issuer survey responses. As an example, an ESG provider relying on a company's reporting mechanisms might primarily use the results of a company's internal employee satisfaction survey versus analyzing employee reviews collected on job review sites to measure employee satisfaction.
We believe issuer ESG reporting will become increasingly standardized in the future in a similar manner to company financial statements. However, both the ESG data landscape and alternative data landscape are developing quickly. While we view more investors will view ESG data as a necessary tool to help monitor potential risks and opportunities, ESG frameworks will continue to evolve rapidly with improvements in the scope and measurement of the data.
How does integrating ESG affect investment returns?
The CFA published a study in 2017 that qualitatively assessing whether picking an SRI focused fund effects performance. The study looked at data from 2005, and adjusted for such factors as company size and geographic region. The researchers concluded on average, SRI funds don’t under-perform their benchmark, and the returns of SRI funds varied by about half as less than the returns of actively managed mutual funds for both domestic and global funds.
Additionally, most research has found that companies with high SRI scores can outperform those without. According to a United Nations report, “sound integration of environment, social and governance factors does not compromise investment performance, and in many cases can enhance it.” Other research, such as a study from the Harvard Business Review, has shown similar results. From our experience, investment managers should not select stocks purely based on corporate values data, but use ESG data in conjunction with their established investment process.
Can Censible load my portfolios, strategies or watchlists?
Censible provides an easy way to drag and drop portfolios and watchlists using common security identifiers such as sedols or tickers as well as third-party providers such as FactSet or Bloomberg.
Will Censible help me manage ESG guidelines and considerations across SMAs?
We think integrating ESG data into a separately managed account (SMA) structure is one of the hardest challenges you face. Our mission is to provide you with the tools to make it seamless for you to manage different ESG guidelines, ethical restrictions, or exclusionary constraints across any number of strategies and accounts.
My firm wants to launch a new ESG strategy, can Censible help with that?
We hope to empower you with the ability to easily investigate, test and launch ESG strategies whether you have a client directed ESG request or want to deliver a new product into the marketplace. Investment managers also have consulted with us directly to build and launch new strategies for clients.
What companies does Censible cover?
We cover more than 50,000 public companies globally. Individual ESG factors range from covering less than 100 companies to over 30,000 companies, including emerging markets. Contact us directly to see what our data coverage is for various markets or ESG issues.
Does Censible analyze mutual funds and ETFs?
Censible has fund holdings information for U.S. based mutual funds and ETFs. However, funds often can hold other funds making it difficult to decipher the underlying companies a fund owns. Through algorithms we have developed, Censible can disaggregate all of the underlying holdings of ETFs and mutual funds. For example, the Calvert International Fund had 49 direct holdings as of 12/31/2017, but due to holding other ETFs or mutual funds, it was exposed to 360 companies if you disaggregate all of the underlying positions. Censible’s disaggregated fund holdings provides you with a way to not only assess ESG risks for a fund, but it also helps gauge investment risks for clients such as over-concentration in a particular company or sector.
Can I screen for new investment ideas?
Our investment screening solution enables you to quickly find new investment ideas based on various ESG criteria. Additionally, institutional investors that subject to various guidelines or investment restrictions can compliantly exclude companies on a number of controversial issues.
Can you integrate my own ESG data?
We realize many managers already have built significant datasets and research that is often lying around in various spreadsheets or documents. We are very interested in working with you on your particular uses and needs to provide you with the best possible solution.
Does Censible just provide ESG data on companies?
We believe strongly in making ESG data and heuristics easy to understand and to incorporate at both the company and the portfolio level. We want to provide the premier solution for quickly gaining insights from identifying if your portfolio is exposed to controversial issues to whether your portfolio is positioned to capitalize on ESG opportunities and trends.
How does Censible link to investment fundamentals?
As company asset value has transitioned from mostly tangible to intangible over the last 30 years, traditional accounting based metrics for assessing a company’s balance sheet have become less meaningful. Many investors are now looking at how alternative data can be applied to measure hidden, off-balance risks and opportunities. Therefore, we derive our approach to building an ESG framework similar to how a fundamental investor would approach valuation and risk. We believe rooting our ESG framework in materiality is very similar to how a fundamental investor would use metrics like ROE or free cash flow to assess a company's valuation.
What ESG or sustainability categories are tracked by Censible?
Our ESG methodology provides high level ESG scores on over 17 categories. Each ESG key issue category is made up of one or more metrics.
Does Censible have any studies on thematic ESG issues?
Censible has publically released its company, mutual fund and ETF rankings on leadership gender diversity.
Does Censible integrate any other ESG frameworks?
Censible’s mission is to enable investment professionals with a seamless solution for integrating ESG data into an investment decisions. Therefore, we always are interested in seeing how we can work with any of your third-party data sources to better serve you.
How does Censible view automated approaches to ESG ratings?
Given the availability and speed of information, we believe news can materially impact a company quickly. We process and update some information, such as data from SEC Edgar Filings or company disclosures in real-time.
However, we believe this approach has its limits, and care must be placed in the underlying datasource and the type of information. For example, in September 2008, an old news article was accidentally republished declaring that United Airlines was filing for bankruptcy. By the time the report was declared unfactual, the stock had already sharply declined over 25%. Censible therefore monitors and assesses any event that creates large changes to its ratings prior to incorporating the data.