A risk-focused ESG approach is critical
RepRisk: Best ESG Solution Provider – It’s a very exciting time to be working in the field of ESG. The industry has recently experienced a sea change in sentiment and it is now accepted that having a risk-focused approach and looking beyond company disclosures are key elements of ESG investing.
“Risk management is in our DNA. It may only be one part of ESG, but it is an essential part. This has been our approach since the beginning – and we believe it’s the best way to generate meaningful, actionable ESG signals,” Alexandra Mihailescu Cichon (pictured), Executive Vice President Sales and Marketing at RepRisk says.
There is an increasing importance being placed on transparency by asset owners, asset managers, and regulators. RepRisk prides itself on being ahead of the curve on this critical issue: “Our clients and partners have always been able to dig into how we identify and analyse risks and how we build our risk metrics. The market is asking for this now and turning away from black-box methodologies and reverse-engineered datasets,” notes Cichon.
The RepRisk dataset is built using a rules-based, consistent methodology. It is generated point-in-time, with daily granularity and close to 15 years of data history. Cichon observes: “It’s like a match made in heaven for quant-focused investors like hedge funds who need consistent, comparable data with granularity and a long time series.”
As a firm, RepRisk’s outlook for hedge funds is that there will be further inroads made for ESG throughout the industry, and ultimately ESG will be an integral part of it. In Cichon’s view: “As that develops, we anticipate hedge funds will have to adapt their strategies to ESG – not the other way around. Using ESG signals as input for portfolio monitoring and optimisation will be essential.”
RepRisk’s ESG risk signals are based on what the world says about a company – not what a company says about itself. They are therefore a reliable predictor of reputational changes which have the potential to become financially material. Innovation is top of mind within the firm and in this context, RepRisk is looking at adding new datasets to its system. Cichon details: “We’re focused on geospatial ESG risk data which we started working on in 2019. This will be done by mapping the coordinates of mining and O&G infrastructure projects in our database to their respective GPS locations.
“Then we can overlay geospatial data on environmentally sensitive areas. This will enable to see if a mine is located on or near a designed protected area or a UNESCO World Heritage Site, for example. In addition, because we have data on both projects and companies, we can link that mine back to the companies which own or operate it. Once we have that rolled out, we are also looking at adding things like remote sensing data.”
In further testament to its dedication to improve, the firm is currently adding three more languages to its platform and will continue to map additional frameworks on top of SASB and SDGs and grow the breadth of features on its ESG Risk Platform.
Through its service, RepRisk data can support hedge funds in both generating alpha and reducing risks – doing good while doing well.
Alexandra Mihailescu Cichon, Executive Vice President, Sales & Marketing, RepRisk
Alexandra Mihailescu Cichon joined RepRisk in 2013 and is the Executive Vice President of Sales and Marketing. Over her tenure, she has established and led RepRisk’s globally distributed Sales, Partnerships, Client Relationship Management, Sales Operations, and Marketing & Communications teams. Before joining RepRisk, Alexandra worked on the Global Sustainability Affairs team at Credit Suisse, focusing on environmental and social risk management, green business opportunities, corporate responsibility reporting, and employee engagement. Alexandra holds a Master’s in Business Administration (MBA) from the University of St Gallen (HSG), in Switzerland, with an exchange semester at the HEC Paris (École des hautes études commerciales de Paris), in France.