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 Financials industry, to understand the best performers. Read on to learn how industry leaders like Fifth Third Bancorp, Intercontinental Exchange Inc, Aon Plc, Aflac Limited, CME Group Inc 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 Health Care sector. For accuracy, we excluded companies that did not meet a minimum threshold of events.
Here is the full list :
1. Fifth Third Bancorp
Fifth Third Bancorp operates as a diversified financial services company in the United States. The company's Commercial Banking segment offers credit intermediation, cash management, and financial services; lending and depository products; and cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing, and syndicated finance for business, government, and professional customers. Its Branch Banking segment provides a range of deposit and loan products to individuals and small businesses. This segment offers checking and savings accounts, home equity loans and lines of credit, credit cards, and loans for automobiles and personal financing needs, as well as cash management services for small businesses. The company's Consumer Lending segment engages in direct lending activities that include origination, retention, and servicing of residential mortgage and home equity loans or lines of credit; and indirect lending activities, including loans to consumers through correspondent lenders and automobile dealers. Fifth Third Bancorp's Wealth & Asset Management segment provides various investment alternatives for individuals, companies, and not-for-profit organizations. It offers retail brokerage services to individual clients; and broker dealer services to the institutional marketplace. This segment also provides asset management services; wealth planning, investment management, banking, insurance, and trust and estate services; and advisory services for institutional clients comprising middle market businesses, non-profits, states, and municipalities.
Fifth Third Bancorps' ESG Pulse is 0.99 out of 1 over the last year, indicating a well managed public profile, free of ESG controversy.
Some of its recent initiatives this year include:
- Fifth Third Announces $180 Million Neighborhood Investment Program in Collaboration with Enterprise Community Partners to Accelerate Revitalization of Nine Communities
- Winning several awards such as Winning W Company, 2020 Women on Boards and Energage Top Workplaces
2. Intercontinetal Exchange Inc
Intercontinental Exchange, Inc. operates regulated exchanges, clearing houses, and listings venues for commodity, financial, fixed income, and equity markets in the United States, the United Kingdom, European Union, Singapore, Israel, and Canada. It operates in two segments, Trading and Clearing; and Data and Listings. The company operates marketplaces for listing, trading, and clearing an array of derivatives and securities contracts across various asset classes, including energy and agricultural commodities, metals, interest rates, equities, ETFs, credit derivatives, digital assets, bonds, and currencies, as well as offers mortgage and technology services. It also offers data services to support the trading, investment, risk management, and connectivity needs of customers across major asset classes. The company operates exchanges and marketplaces; cash equities, equity options, and bond exchanges; and over-the-counter markets for physical energy, fixed income, credit default swaps, and central counter-party clearing houses
Intercontinental Exchange Incs ESG Pulse is 0.94 out of 1 over the last year, a standout performer using ESG Analytics AI based methodology. There is virtually no identifiable controversy risk for the company, and this is echoed by other external providers with a score of 17 from Sustainalytics and a BBB from MSCI.
This chart highlights their overall ESG Pulse by topic (which is derived from the industry standard SASB classification)
3. Aon Plc
Aon plc, a professional services firm, provides advice and solutions to clients focused on risk, retirement, and health worldwide. It offers commercial risk solutions, including retail brokerage, cyber, and global risk consulting solutions, as well as acts as a captive insurance solutions provider; and health solutions, such as health and benefits brokerages, and health care exchanges. The company also provides treaty and facultative reinsurance, as well as mergers and acquisition, capital raising, strategic advisory, restructuring, and recapitalization services; insurance-linked securities; and corporate finance advisory services, capital markets solutions, and risk management products
Aon Plc has an ESG Pulse of 0.92 out of 1, and is not included in any negative screens. This pulse score highlights an extremely low controversy risk, and a well managed company from an ESG perspective.
Some initiatives over the last year include:
- Three Aon Colleagues Recognized as HERoes Women Role Models by INvolve
- Aon CEO Greg Case Recognized as Top Ally on INvolve OUTstanding LGBT+ Ally Executives List
- Release of a program to allow small farmers in India to get insurance policies
4. Aflac Incorporated
Aflac Incorporated, through its subsidiaries, provides supplemental health and life insurance products. It operates through two segments, Aflac Japan and Aflac U.S. The Aflac Japan segment offers cancer, medical, income support, and whole and term life insurance products, as well as WAYS and child endowment plans under saving type insurance products. The Aflac U.S. segment provides cancer, accident, short-term disability, critical illness, hospital indemnity, dental, vision, and term and whole life insurance products in the United States. It sells its products through sales associates, brokers, independent corporate agencies, individual agencies, and affiliated corporate agencies.
Aflac lands an ESG Pulse of 0.98 out of 1, and has a low amount of contraversies.
Some initiatives over the last year include:
- Aflac on Ethisphere's World's Most Ethical Companies List for 15th Consecutive Year
- Aflac Ranks Top 20 on LATINA Style's List of 50 Best Companies for Latinas to Work for in the U.S.
- Aflac Community Giving contributed nearly $7 million to nonprofit causes, including supporting organizations for minorities, pediatric cancer, health and education in the U.S
- Aflac Japan's carbon emissions decreased by approximately 48% since 2004
5. CME Group Inc.
CME Group Inc., through its subsidiaries, operates contract markets for the trading of futures and options on futures contracts worldwide. It offers futures and options products based on interest rates, equity indexes, foreign exchange, agricultural commodities, energy, and metals, as well as fixed income products through its electronic trading platforms, open outcry, and privately negotiated transactions. The company also provides clearing for exchange-traded contracts and cleared swaps, as well as settlement services; and transaction lifecycle management services, such as trade and portfolio management, financial resource optimization, regulatory reporting, and trade processing. In addition, the company offers a range of market data services, including real-time and historical data services. It serves professional traders, financial institutions, institutional and individual investors, corporations, manufacturers, producers, governments, and central banks. The company was formerly known as Chicago Mercantile Exchange Holdings Inc. and changed its name to CME Group Inc. in July 2007.
CME has a ESG Pulse of 0.99 out of 1, and has no material ESG controversies of note.
They have been active in bringing ESG focused solutions such as carbon offset futures to aid in critical risks that companies are facing when managing their footprint.