News & Events
Bloomberg ESG and Why It Matters
15 November 2016
Since its founding in 1981, Bloomberg LP have collected and supplied financial, business and market news, data and analysis to subscribers around the world, helping investors and finance professionals gauge investment strategy and market behaviour.
In recent years, new types of data, particularly environmental sustainability data, have become increasingly important to investors, prompting Bloomberg to begin providing Environmental, Social and Governance (ESG) data through their famed Bloomberg terminals.
However, the environmental data information provided by Bloomberg is collected from published environmental sustainability and performance reports and other public sources—for which there is no standard of quality or type of information disclosed.
In light of this, every year Bloomberg sends the ESG data they intend to publish to all the included companies, giving each organisation the opportunity to check and correct its environmental data. Depending on a company’s environmental management software and their environmental reporting sophistication, that environmental data management process can be challenging and labour intensive enough to beg the question: is it worth it?
Bloomberg ESG data is becoming more important to investors and ratings agencies.
The importance of environmental sustainability and performance data disclosure has been on the rise in recent years, with everyone from corporate boards to national leaders to multinational investors paying close attention. As one of the most influential barometers of global financial markets, Bloomberg’s interest in continuing that trend is significant.
The company’s founder, Michael R. Bloomberg, chairs the recently launched, industry-led Task Force on Climate-Related Financial Disclosures (TCFD), with a stated mission to “develop voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers and other stakeholders.”
As Mr. Bloomberg explained, “increasing transparency makes markets more efficient and economies more stable and resilient.” The Bloomberg company asserts that the coupling of financial and sustainability data is natural, and their involvement with the Task Force is based on the need to integrate environmental data and financial reporting to provide a fuller picture of both the current performance and future potential of companies. The efforts of the TCFD will result in a new, voluntary reporting standard to ensure the quality and content of climate-related financial disclosures.
For an index to be truly useful, it must include a rating.
Using its influence as a worldwide media conglomerate, Bloomberg seeks to use market forces and information to create change. As Mr. Bloomberg said in the company’s Impact Report Update 2015, “Market forces, combined with technological innovation, are the two most powerful drivers of change in the world. If through our products and initiatives we can help our customers make smart choices, we can drive economic growth that protects our planet and improves lives around the world.”
Gaining access to complete and comparable climate-related statistics will enable Bloomberg and their subscribers to accurately assess and measure the world’s top companies. Large corporations, especially multinational ones, will strive to outperform both expectations and competition in order to gain advantages in new markets and to attract capital.
Smart, young professionals evaluating employment opportunities now seek to work for corporations with a positive environmental image. Investment corporations and ratings agencies are including environmental sustainability and performance when presenting and rating investment opportunities. The trend toward corporate transparency and environmental reporting is unlikely to reverse, and with organisations like Bloomberg on board, the movement is more likely to pick up speed.
Active participation is required to stay competitive.
Government regulations have already created the need for companies to leverage environmental performance software to report on large amounts of sustainability and environmental data including emissions and discharges. Additionally, multinationals have seen market values plunge when details of substandard labour practices have been reported by the media.
There are many reasons for companies to closely monitor their chain-of-custody of materials and environmental impact data, and presumably a majority of those published in the Bloomberg Index have access to a large amount of sustainability data. However, accessing, organising and analysing that data can be a cumbersome task depending on how it is stored and managed.
Control of company environmental data should be of critical importance to all corporations; relying on the collection and publication of data from open sources is a risky strategy, leaving a company open to at least incorrect interpretation, if not damaging misrepresentation. By participating in the Bloomberg ESG data survey, corporations stand to benefit in two ways: their published environmental data is correct, and they are motivated to show progress on all sustainability indicators.
Demonstrate and inspire confidence through participation.
The trend toward incorporating financial and environmental data is officially established, and with the backing of major financial and business influencers like Bloomberg, the movement will continue. Although a lot of reporting is voluntary today, non-participation in the most important analytical surveys causes companies to lose control over their data.
In September 2016, the decision was made to partner Bloomberg ESG with RobecoSAM, publishers of the DowJones Sustainability Index, a move that will likely further increase the motivation to participate in voluntary data submission.
Besides providing a more comprehensive picture of financial risk for potential investors and market-watchers, the proper collection, analysis, reporting and disclosure of financial and environmental data can be a valuable tool to spur innovation within a company.
The focus and desire needed to climb the ranks of such increasingly important and publicly available indices can be the motivation needed to pursue new avenues of improvement or growth. When it comes to improved corporate environmental sustainability, such participation and innovation can have benefits that reach well beyond the Bloomberg terminal.Return to News & Events