RepRisk provides a comprehensive data solution for understanding ESG exposure and risks on a global scale. With detailed breakouts of the environmental, social, and governance factors as well as a proprietary RepRisk Index (RRI) score, it is easy to quantify a company or portfolio’s exposure to ESG-related risks. Data is collected, aggregated, and analyzed from multiple third-party sources, including over 80,000 media and stakeholder sources. This outside-in perspective helps you assess whether a company’s policies and processes are translating into actual performance on the ground.
New source of alpha for quantitative investment models
Overweight / underweight regions or sectors based on aggregated ESG factors
Identify risk incidents related to negative ESG events
Create screens for a given sector to identify desirable and undesirable companies based on ESG values
Monitor risk incidents
RepRisk offers universal coverage—i.e., RepRisk captures any company exposed to ESG risks, regardless of the company’s size, sector, country of headquarters or operations, or whether the company is public or private. Currently this represents over 100,000 companies, providing ESG breakouts and RRI scores across the globe. Figure 1 highlights this detail, showing the number of companies with risk incidents, based on the company headquarters.
Figure 1: Company Coverage
In order to calculate the RepRisk Index (RRI) score, risk incidents must be tracked and categorized appropriately. Figure 2 highlights not only the volume of these incidents, but the sheer amount of information tracked and tagged going back to 2007. Currently RepRisk is collecting over 100,000 risk incidents per month in order to produce the RRI score as well as several other metrics, including categorization of these incidents into Topic Tags, Issues, and Principles.
Figure 2: Risk Incident Classification
In addition to collecting and organizing these incidents into their respective environment, social, and governance-related bins, RepRisk also tracks its own set of Issues and Tags, as well as alleged violations of one or more of the 10 Principles of the UN Global Compact. These are highlighted in Figures 3 through 5 below.
RepRisk’s core research scope is comprised of 28 ESG Issues that are broad, comprehensive, and mutually exclusive. The 28 Issues drive the entire research process, as every risk incident is linked to at least one of these Issues. When RepRisk screens the media and stakeholder sources, it screens for any risk information linked to these Issues (show in Figure 3).
Figure 3: Issues
These 28 Issues can be specifically mapped to the 10 Principles of the UN Global Compact, which are also tracked in the data feed, with the number of linked risk incidents per principle shown in Figure 4.
Figure 4: UNGC Principles
RepRisk also covers 45 additional Topic Tags, which are designated ESG “hot topics,” or extensions of RepRisk’s core ESG Issues research scope. Topic Tags are specific and thematic, and one Topic Tag can be linked to multiple ESG Issues. They are a dynamic concept, with the list expanding over time. Figure 5 highlights the list of Topic Tags.
Figure 5: Topic Tags
There are several ways RepRisk provides a unique take on ESG data:
•Daily data—allows users to understand the far-reaching impacts of risk incidents as they unfold through several easy to understand metrics
•More than just ESG scores—assigns risk incidents to more granular categories of Issues, UNGC Principles, and Topic Tags
•Track severity (harshness) of risk incidents—the severity is determined in a rule-based way as a function of three dimensions:
•What are the consequences of the risk incident (e.g., with respect to health and safety: no further consequences, injury, death)
•What is the extent of the risk incident (one person, a group of people, a large number of people)
•Was the risk incident caused by an accident, by negligence, or intent, or even in a systematic way
•Track reach (influence) of risk incidents—all sources are pre-classified by reach (influence based on readership/circulation)
•Low influence sources would include local media, smaller NGOs, local governmental bodies, blogs, internet sites, etc.
•Medium influence sources include most national and regional media, international NGOs, and state, national, and international governmental bodies
•High influence sources are the few international media that reach global audiences—e.g. the FT, NY Times, BBC, and others
Example Use Case
There are a number of ways to utilize ESG data, but one way involves tracking an individual company and looking for deviations in their risk exposure. Volkswagen is an interesting example, as they have historically had higher levels of risk, averaging in the 40s-60s for their RRI score, as shown in Figure 6. It was not until the diesel scandal was unveiled when they hit their peak RRI of 77. As the transparency and number of systematic controls put in place increased at VW, its RRI began to regress (although the company is still considered to have very high-risk exposure). The risk incident counts for VW show an interesting pattern as well—a 5x increase after their diesel scandal was unveiled. RepRisk has captured more than 500 risk incidents (on a rolling two-year basis) on VW, helping users of their data to sift through noise and produce valuable output.
Figure 6: Volkswagen Example
Whether you are trying to take a systematic approach to an ESG-related investment strategy or simply trying to get a feel for your portfolio’s exposure to specific ESG factors, RepRisk can help you fill a crucial data void. For more information on RepRisk, including case studies, white papers, and additional research, please visit the partner page on the Open:FactSet Marketplace. If you have any questions please contact us at OFSupport@factset.com.