GLOBAL - Environmental, social and governance (ESG) research needs to include analysis that is forward-looking, say researchers at Société Générale.
Carole Crozat, analyst for socially responsible investment (SRI) at Société Générale (SG) Cross Asset Research, told IPE: "A lot of data used for ESG research relies on the past.
"The development of non-financial data and metrics has made huge strides over the last 10 years and helps us evaluate ESG performance.
"But our research process must be dynamic to enable us to evaluate changing trends and potential risk catalysts at the same time."
Niamh Whooley, SRI analyst at SG Cross Asset Research, added: "The growth in ESG investment opportunities and risks must also be understood against the background of recent global macroeconomic drivers of change, such as the emerging markets' impact on global consumption, from food to infrastructure needs.
"An important part of our research is to distinguish between those ESG issues that are already well understood by the market and those that are not and bring our SRI focus to the latter."
SG Cross Asset Research recently published an all-sector covering equity report, which identified key ESG issues that are a blend of operational management in areas such as health and safety and people management, alongside a forward-looking focus on emerging themes.
Yannick Ouaknine, senior SRI analyst at SG Cross Asset Research, said: "As with financial analysis, the non-financial data on all aspects of the company's past sustainability performance helps us to position the company.
"But on top of that, we advocate focusing on a handful of key ESG issues in each sector in order not to lose the signal of what could impact on financial performance."
The 'SRI: Beyond Integration - from satellite to core' report found that the materiality of ESG issues has increased over the past few years and aimed to identify those that can have an impact on company cash flow, balance sheets, reputation and value.
It includes a watchlist of companies that illustrate good management and innovation in their specific sector.
In their integrated ESG research, Crozat, Whooley and Ouaknine work with equity, credit and commodities analysts and asset strategists, as well as economists.
Crozat and Ouaknine are based in Paris, while Whooley works with Société Générale's financial teams in London.