Historically, evaluating investments focused solely on financial returns. However, with the growing significance of climate change, the concept of “triple bottom line” or financial, environmental, and social impact has been gaining traction. This push to look at investment decisions more holistically has given rise to ESG (Environmental, Social, and Governance) practices and policy.
ESG measures the societal and sustainability impact of every business activity. Investors are now looking to responsibly invest in companies that manage their impact on the environment and society at large. To serve this need of investors.
ESG rating agencies use analysts to measure the performance of various companies and compare them through ratings and rankings, this does not always show the full picture as the rankings can sometimes be as old as 6-12 months.
ESG Analytics is a platform that uses artificial intelligence and alternative data (data outside of corporate disclosures) to benchmark company ESG performance, this allows for more company coverage, real time insights and the ability to look beyond a score to determine whether a company meets the ESG criteria you are looking for.
We took a look at the Energy industry, to understand the best performers. Read on to learn how industry leaders like TechnipFMC plc, Diamondback Energy, EOG Resources Inc, Valero Energy Corporation, ONEOK demonstrate a well managed company, with low ESG controversy risk.
How were these companies selected?
Each day, ESG Analytics processes millions of documents to identify and manage ESG risk using our proprietary Natural Language Processing (NLP) algorithms. Once we identify a material event, we classify it according to the industry leading SASB framework (26 different ESG topics) and then run sentiment analysis to determine how positive of negative the event is. This chart below shows the ESG Pulse of companies in the Energy sector. For accuracy, we excluded companies that did not meet a minimum threshold of events.
Here is the full list:
TechnipFMC plc engages in the oil and gas projects, technologies, and systems and services businesses. It operates through three segments: Subsea, Onshore/Offshore, and Surface Technologies. The Subsea segment manufactures and designs products and systems; performs engineering, procurement, and project management; and provides services used by oil and gas companies involved in offshore exploration and production of crude oil and natural gas.
TechnipFMC's ESG Pulse is 0.94 out of 1, indicating a well managed public profile, free of ESG controversy.
2. Diamondback Energy
Diamondback Energy, Inc., an independent oil and natural gas company, focuses on the acquisition, development, exploration, and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas. It primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin; and the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin in West Texas and New Mexico.
Diamondback Energy has an ESG Pulse of 0.98 out of 1, a standout performer using ESG Analytics AI based methodology.
3. EOG Resources Inc
EOG Resources, Inc., together with its subsidiaries, explores for, develops, produces, and markets crude oil, and natural gas and natural gas liquids. The company's principal producing areas are located in New Mexico, North Dakota, Texas, and Wyoming in the United States; and the Republic of Trinidad and Tobago, the People's Republic of China, and Canada.
EOG Resources, Inc has an ESG Pulse of 1 out of 1, and is not included in any negative screens.
There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 39 from Sustainalytics and a BBB from MSCI.
4. Valero Energy Corporation
Valero Energy Corporation manufactures and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. It operates through three segments: Refining, Ethanol, and Renewable Diesel. The company is involved in oil and gas refining, marketing, and bulk selling activities.
Valero Energy Corporation lands an ESG Pulse of 0.94 out of 1, and has a low amount of contraversies.
Valero generally has low risk from external ESG providers, and their executive compensation is well within the acceptable ranges of their peer group.
5. ONEOK, Inc
ONEOK, Inc., together with its subsidiaries, engages in gathering, processing, storage, and transportation of natural gas in the United States. It operates through Natural Gas Gathering and Processing, Natural Gas Liquids, and Natural Gas Pipelines segments. The company owns natural gas gathering pipelines and processing plants in the Mid-Continent and Rocky Mountain regions. It also gathers, treats, fractionates, and transports natural gas liquids (NGL), as well as stores, markets, and distributes NGL products.
ONEOK has a ESG Pulse of 0.97 out of 1, and has no material ESG controversies of note.
There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 25.4 from Sustainalytics and a BBB from MSCI.