Using ESG to inform better decision-making starts with data. Increased transparency and improved reporting can help, investors understand their exposures, take action to achieve their investment goals and monitor progress.
Our proprietary ESG scoring system draws on data from multiple providers, the Sustainability Accounting Standards Board (SASB)’s widely accepted, transparent materiality framework and relevant corporate governance codes to generate a unique ESG score for approximately 10,000 issuers.
Why we Built R-Factor™
At State Street Global Advisors, we believe that the consideration of financially material ESG factors in the investment process is an integral part of honoring our fiduciary duty. We believe doing so is our responsibility, and so we've built the Responsibility-Factor, or "R-Factor™," score.
R-Factor™ is an ESG scoring system that draws on multiple data sources and leverages widely accepted, transparent materiality frameworks to generate a unique ESG score for listed companies.
Quality data about companies’ ESG practices is critical for effective investment analysis, but the lack of standardization and transparency in ESG reporting and scoring presents major challenges for investors. R-Factor™ was built to help address the data quality problem and to remove opaqueness around ESG materiality in the scoring process.
In doing so, R-Factor™ is designed to contribute to more sustainable capital markets.
Defining Characteristics of R-Factor™
R-Factor™ is designed around four core pillars:
Focus On Financial Materiality
For investors to be able to trust and integrate ESG scoring into their investment process, they seek confidence that the ESG considerations are material and have a link to long-term value creation. R-Factor™ draws on frameworks that are widely supported by other investors, thereby helping convey to companies and investors which ESG factors are material to a company’s performance and are therefore important to disclose.
Commonly accepted, transparent frameworks
We selected the Sustainability Accounting Standards Board (SASB) materiality map as well as national and/or investor-developed corporate governance codes, because they are transparent frameworks supported by large numbers of investors.
Multiple Data Sources
R-Factor™ is powered by the raw metrics from four different data providers. This approach increases the overall coverage of our data set, helping to address the gaps that exist with any one data provider. Using the inputs from multiple providers also reduces the potential biases that may be built into a provider’s methodology.
R-Factor™ is incorporated into and supported by the efforts of our Asset Stewardship team. We disclose companies’ R-Factor™ scores, as well as the underlying basis for those scores, through our engagements with portfolio companies. This gives boards and management teams a roadmap for the specific dimensions that investors are evaluating to assess a company’s sustainability efforts. It also helps companies identify which metrics to disclose and manage to improve future scores, creating a positive feedback loop in the market.
Supporting Sustainable Capital Markets
R-Factor™ supports the development of sustainable capital markets by helping investors identify ESG solutions that integrate financially material ESG data while incentivizing companies to improve their ESG practices and disclosure in areas that matter.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.
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