CSRHub Integrates a Signal From ESG Analytics

Jun 6, 2024 9:15 AM ET
Campaign: CSRHub Research

As previously seen on the CSRHub blog.

By Bahar Gidwani

ESG Analytics is an alternative data provider owned and operated by ExtractAlpha, a Hong Kong-based data company. ESG Analytics creates and tracks non-traditional sources to measure how companies, countries and investment funds are implementing ESG (environmental, social and governance) practices. Its dataset was created for investment uses out of its founders’ frustration with what they perceived to be the slow analysis, low quality, and inherent biases of other ESG rating systems.

CSRHub has integrated a number of ESG ratings sets that are based on natural language processing (NLP) into its consensus system. ESG Analytics’ scores have a lower correlation with CSRHub’s Overall Rating than most of these other systems.

See graph showing 9% correlation between ESG Analytics score and and CSRHub overall ratings.

The strongest connection appears to be with CSRHub’s Environment subscores. While the correlation shown below is only 6%, the connection between our systems has high significance (F score > 60). This suggests that the ESG Analytics score is at least influenced by consensus views.

See graph showing 6% correlation between ESG Analytics and and CSRHub environment scores.

We suspect that ESG Analytics is looking for (and finding) different signals than those identified by our other investor-facing sources. It is also focused on “real time” transmission of signals. CSRHub’s scores react more slowly as the consensus view it is reporting gradually shifts up and down.

We feel ESG Analytics offers yet another unique perspective we can integrate into CSRHub—that of the quantitative investor analyst community. We expect some of our clients to soon test combining ESG Analytics’ short-term signal with CSRHub’s longer-term lagging information.

Bahar Gidwani is CTO and Co-founder of CSRHub. He has built and run large technology-based businesses for many years. Bahar holds a CFA, worked on Wall Street with Kidder, Peabody, and with McKinsey & Co. Bahar has consulted to a number of major companies and currently serves on the board of several software and Web companies. He has an MBA from Harvard Business School and an undergraduate degree in physics and astronomy. He plays bridge, races sailboats, and is based in New York City.

About CSRHub

CSRHub offers the most comprehensive global set of Consensus ESG (Environmental, Social, and Governance) ratings, information, and tools. CSRHub’s business intelligence system measures the ESG business impact that drives corporate and investor sustainability decisions. Founded in 2007, CSRHub covers 55,000 public and private companies, and provides ESG performance scores on over 35,000 companies from 135 industries in 210 countries. Our Big Data platform uses algorithms to aggregate, normalize and weight ESG metrics from 933 sources to produce a strong consensus signal on corporate sustainability performance.