Russell Investments has developed a new way to measure a company’s ESG score. The new material score evaluates only those issues that are financially important to a company.
Overview of Materiality matters
ESG scores are used for a variety of reasons, and there is no one universal ESG score. Therefore the traditional ESG scores incorporated into many financial products are not designed to focus on the ESG issues that are relevant to the financial performance of the company.
For example fuel efficiency has a bigger impact on the bottom line of an airline than it does on an investment bank.
So, rather than adopt a one-size-fits-all approach, we have developed a new ESG scoring system that is specific to a company and their profitability.
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Key research findings
Not all ESG issues are equal
Our research showed that
< 25% of data items in traditional ESG scores were considered material for two thirds of all securities in the Russell Global large cap universe.
From our initial research we have found a significant performance improvement when focusing on stocks that have higher material ESG characteristics.
Contact us to learn more about Materiality matters
Any opinion expressed is that of Russell Investments, is not a statement of fact, is subject to change and does not constitute investment advice.
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