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

Disclaimer

The information and recommendations made available here through our emails, newsletters, website, press releases, collectively considered as (“Material”) by Sophic Capital Inc. (“Sophic” or “Company”) is for informational purposes only and shall not be used or construed as an offer to sell or be used as a solicitation of an offer to buy any services or securities. You hereby acknowledge that any reliance upon any Materials shall be at your sole risk. In particular, none of the information provided in our monthly newsletter and emails or any other Material should be viewed as an invite, and/or induce or encourage any person to make any kind of investment decision. The recommendations and information provided in our Material are not tailored to the needs of particular persons and may not be appropriate for you depending on your financial position or investment goals or needs. You should apply your own judgment in making any use of the information provided in the Company’s Material, especially as the basis for any investment decisions. Securities or other investments referred to in the Materials may not be suitable for you and you should not make any kind of investment decision in relation to them without first obtaining independent investment advice from a qualified and registered investment advisor. You further agree that neither Sophic, its employees, affiliates consultants, and/or clients will be liable for any losses or liabilities that may be occasioned as a result of the information provided in any of the Company’s Material. By accessing Sophic’s website and signing up to receive the Company’s monthly newsletter or any other Material, you accept and agree to be bound by and comply with the terms and conditions set out herein. If you do not accept and agree to the terms, you should not use the Company’s website or accept the terms and conditions associated to the newsletter signup. Sophic is not registered as an adviser under the securities legislation of any jurisdiction of Canada and provides Material on behalf of its clients pursuant to an exemption from the registration requirements that is available in respect of generic advice. In no event will Sophic be responsible or liable to you or any other party for any damages of any kind arising out of or relating to the use of, misuse of and/or inability to use the Company’s website or Material. The information is directed only at persons resident in Canada. The Company’s Material or the information provided in the Material shall not in any form constitute as an offer or solicitation to anyone in the United States of America or any jurisdiction where such offer or solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation. If you choose to access Sophic’s website and/or have signed up to receive the Company’s monthly newsletter or any other Material, you acknowledge that the information in the Material is intended for use by persons resident in Canada only. Sophic is not an investment advisory, and Material provided by Sophic shall not be used to make investment decisions. Information provided in the Company’s Material is often opinionated and should be considered for information purposes only. No stock exchange anywhere has approved or disapproved of the information contained herein. There is no express or implied solicitation to buy or sell securities. Sophic and/or its principals and employees may have positions in the stocks mentioned in the Company’s Material and may trade in the stocks mentioned in the Material. Do not consider buying or selling any stock without conducting your own due diligence and/or without obtaining independent investment advice from a qualified and registered investment advisor.