German analytics and index provider Qontigo plans to launch what it claims is a “one-of-its-kind” environmental, social and governance (ESG) analytics solution by the end of the year.
The company, a unit of Deutsche Boerse Group, is currently in the midst of developing the solution, which will give a more accurate picture than most other ESG analytics tools in the market today, according to Rodolphe Bocquet, Qontigo’s global head of sustainable investment.
He says most of the other tools provide a company’s climate score with the analysis largely based on its greenhouse gas emissions. The emissions data is only updated once a year.
“Most, if not all, of the ESG analytics tools the industry has today are rather backward looking. The capabilities are limited,” Bocquet says in an interview with Asia Asset Management. “The ESG analytics solution we are developing will be more forward looking, and able to provide investors a more accurate picture in real time.”
According to Bocquet, most of the rival tools don’t reveal much about how a company manages climate change.
“If you have two companies, both with the same ESG score or amount of greenhouse gas emissions, it is hard to tell which one will be able to manage climate change more efficiently in the long term with the current solutions in the market. We hope to change that with our new solution,” he says.
Qontigo’s tool will also embed stress-testing capabilities, allowing investors to find out how a company’s profitability may be affected by different ESG-related scenarios.
“The tool will be able to carry out various stress-test scenarios – such as a company’s bottom-line impact if the European Commission or the Biden administration implements a new carbon tax for imported goods,” Bocquet says.
Qontigo also recently announced a partnership with the International Institute of Green Finance, which provides ESG ratings for Chinese companies. This will allow Qontigo to develop China ESG benchmarks under the STOXX brand names.
“We hope to launch these indices soon,” Bocquet says. “When you talk about sustainability, you simply can’t ignore China. It has a huge role to play, as a factory of the world.”