Sustainalytics Publishes New Research Report that Examines the Prevalence of ESG Incidents

TORONTO, Jan. 08, 2018 -- Sustainalytics, a leading global provider of ESG and corporate governance research, ratings and analytics, today released a thematic research report titled, Understanding ESG Incidents: Key Lessons for Investors. Based on analysis of over 29,000 incidents that took place from 2014 to 2016, the report identifies prominent incident categories, where incidents are occurring, and which industries are most involved. The report also considers how incident analysis can be integrated into portfolio strategy, including industry tilts, beta analysis and security selection, as well as corporate engagement processes.

Sustainalytics’ incident collection framework covers 45 incident categories and 60,000 sources of information worldwide, and provides comprehensive insight into company activities that generate undesirable social or environmental effects. The key findings from Sustainalytics’ report include:

• Quality and safety and business ethics are the two most common ESG incident types, accounting for 30 percent of all incidents;
• The banking industry accounts for 19 percent of all incidents, more than twice the amount of the next most exposed industry (food products);
• Adjusting for differences in industry size, the automobile industry is the most incident prone, and real estate is the least; and
• Over 40 percent of incidents occur in the U.S., the highest concentration of any country.

“Incidents can reveal policy gaps, weak enforcement mechanisms and even vulnerabilities in corporate strategy,” said Doug Morrow, director of Thematic Research at Sustainalytics. “The analytical framework we develop in our report can help investors assess their exposure to ESG incidents and apply this information in their portfolio decision-making and engagement processes.”

Sustainalytics’ research found that high-impact incidents are associated with a six percent average decline in the market cap of affected companies. Additional analysis found that a portfolio of top incident performers outpaced the global equity market by 11 percent from 2014 to 2017, suggesting outperformance potential of incidents analysis.

To present the findings from its new report, Sustainalytics will host three regional webinars on Thursday, January 18, 2018. To register for the webinar and access the report, click here. 

About Sustainalytics
Sustainalytics is a leading independent ESG and corporate governance research, ratings and analytics firm supporting investors around the world with the development and implementation of responsible investment strategies. For over 25 years, the firm has been at the forefront of developing high-quality, innovative solutions to meet the evolving needs of global investors. Today, Sustainalytics works with hundreds of the world’s leading asset managers and pension funds who incorporate ESG and corporate governance information and assessments into their investment processes. With 13 offices globally, Sustainalytics has more than 350 staff members, including over 170 analysts with varied multidisciplinary expertise across more than 40 sectors. Through the IRRI Survey, investors selected Sustainalytics as the best independent responsible investment research firm for three consecutive years, 2012 through 2014, and in 2015 and 2016, Sustainalytics was named among the top three firms for both ESG and corporate governance research. For more information, visit www.sustainalytics.com.