ESG Metrics Gaining Relevance for Investors

On March 17, 2021, Sophic Capital client AnalytixInsight [OTC:ATIXF, TSXV:ALY] announced the inclusion of Environmental, Social, and Governance (“ESG”) and Environmental, Social, Governance, and Controversies (“ESGC”) scores to its research solutions. AnalytixInsight, a pure play artificial intelligence/machine learning (“AI/ML”) firm, will add ESG and ESGC metrics to its financial analytics platform CapitalCube, which provides proprietary financial content on 50,000 global stocks to investors, information providers, financial institutions, and media. In this report, we discuss what ESG and ESGC scores are and why they are increasingly important to investors.

ESG and ESGC Defined

ESG scores transparently and objectively measure a company’s relative ESG performance, commitment and effectiveness as measured against certain relevant themes and suggests potential risk exposure to these themes. ESG is not a standardized measure, so it’s important to understand how a provider calculates the score. However, in general, environmental criteria examine how effective a company is at safeguarding nature. Social criteria investigate the company’s relationships with all stakeholders, such as, employees, suppliers, customers, and communities. Governance focuses on corporate leadership, executive pay, audits, internal controls, and shareholder rights.

ESG analysis provided by AnalytixInsight is based on data sourced from partner Refinitiv, measuring 10 main themes based upon public, auditable data. Other popular ESG data providers include Bloomberg ESG Data Services, MSCI, and Sustainalytics ESG Risk Ratings.

ESGC is calculated from ESG. It is a newer metric that discounts ESG scores for issues regarding corporate controversies captured from media sources. AnalytixInsight’s Refinitiv measure incorporates 23 controversy measures to determine a company’s ESGC score.

Some factors that go into Refinitiv’s ESG calculations

Source: Refinitiv

ESG and ESGC are Increasingly Important to Institutional and Retail Investors

ESG issues are becoming priorities for boards and shareholders; and not only retail investors but institutional investors as well, who are commonly demanding accountability for a company’s operations. A 2020 survey of institutional investors found that 42% of respondents had adopted ESG considerations into their investment decisions and 33% were considering it.

We believe that ESG is also becoming an increasing focus for retail investors. Millennials and other young investors are accumulating capital, investing it, and will be wealthier investors over the coming decades. This is the generation that values trust and community above all else and demands transparency, accountability, and credibility. Baby Boomers currently have most of the wealth invested in the markets and want their legacy to be as sound stewards of the world. This implies that both older and younger investors will likely place a greater emphasis on ESG and ESGC scores to hold firms (and themselves) accountable.

Source: FT.com, March 17, 2021

Forward Looking Retail Brokers Will Add ESG and ESGC Scores to Their Platforms

As mentioned, corporate transparency, credibility, and accountability are paramount to young investors.  These are the investors that will be investing for decades to come, and brokers keen to attract this demographic can improve their chances by adding research that includes ESG and ESGC scores.

Sophic Capital client AnalytixInsight Inc. (“AnalytixInsight” or the “Company”) [SXV: ALY, OTC: ATIXF] is a pure play AI/ML firm with Fintech solutions used by The Wall Street Journal, Morningstar, Refinitiv, and Intesa Sanpaolo.  AnalytixInsight’s CapitalCube generates machine-created financial content on 50,000 global stocks, including underserviced micro-, small-, and mid-cap stocks, which we believe will see a decline in analyst coverage (as discussed in Sophic Capital’s AnalytixInsight’s Hidden Value in an AI-Powered FinTech Play report).

On March 17, 2021, AnalytixInsight announced the launch of ESG analytics on CapitalCube, providing performance analysis and scoring summaries on about 9,000 global companies that report their ESG measures. AnalytixInsight will also add CapitalCube ESG analysis and scoring metrics for stocks listed on InvestoPro, the European online financial broker platform of its Fintech affiliate MarketWall (AnalytixInsight owns a 49% interest in MarketWall). InvestoPro has been developed as a stock trading platform with a focus on fundamental analysis, research, and education, and will be offered to European users, following regulatory approvals.  MarketWall has also recently launched a white-labelled B2B trading platform solution called GEMINA. GEMINA will demonstrate its proven speed-to-market and cost-saving advantages in the digital transformation of the traditional trading platforms of banks and brokers into the era of digital, mobile-enabled, online trading. GEMINA can now also include the ESG metrics deemed crucial by young investors. Investors who want to participate in this theme, should consider adding AnalytixInsight to their ‘best microcap stocks’ list.

In our next piece, we will discuss potential upcoming developments at MarketWall, which should bode well for AnalytixInsight shareholders.

Example of a CapitalCube ESG report

Source: AnalytixInsight


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