// ESG Evaluation

Independently classify and compare managers' ESG behavior and exposures, and their impact on performance.

Analyze actions, not words.

Environmental, social and governance issues are becoming a first-order priority, but differing definitions, interpretations and reporting standards pose a major challenge for investors.

The multi-dimensionality and complexity of ESG issues has produced an ever-growing array of metrics, ratings, and approaches. These often yield conflicting conclusions, and they all share a major weakness: reliance on voluntary, unaudited and self-reported data — often in the form of qualitative questionnaires.

Empirically's innovative Behavioral ESG methodology studies what managers actually do, not what they say. By combining a manager's trading behavior and investment decisions with our proprietary data pool, we can deliver objective insights about a fund's true ESG strategy, exposures and risks.

ESG Analytics Suite

Leveraging advanced technology, proprietary data, and deep expertise to support clients' selection and review efforts.

EPSE

Advanced strategy simulation with complex constraints.

Premortem

Flexible scenario analysis, decision modeling and risk evaluation.

RealESG

Behavioral ESG evaluation based on actions, not words.

Key Diligence Questions

Select a topic area to view examples of the types of questions we can answer, after customization to the case at hand, to support review and evaluation processes.

  • ESG Approach Identification

    • Based on its holdings and trading activity, what is the imputed ESG approach being followed by the strategy?
    • What is the level of correspondence between the imputed approach and the fund manager's stated approach?
    • Which is the strategy's exposure to particular environmental, social and governance issues?
  • Performance, Risk and Comparison to Alternatives

    • What is the probability that a given ESG-aware strategy will deliver performance and risk parameters as good or better than a non-aware alternative?
    • Is there evidence that ESG-related constraints have had a material positive or negative impact on performance?
    • How prone is the strategy to holding firms involved in high-profile ESG crises, compared to a benchmark index or alternative fund choices?
    • How can the effectiveness of the strategy's ESG objectives be tracked objectively over time?
    • What beliefs or criteria would be required to justify paying a higher fee for an ESG strategy?
  • Manager-Level Practices

    • How consistently is a firmwide ESG policy being adhered to among multiple strategies marketed by an asset manager?
  • Integrative Decision Making

    • Which candidate strategy achieves the best balance between financial and non-financial objectives?
    • Which strategy that meets particular non-financial criteria (such as manager diversity) has the highest future likelihood of performing as good or better as the best non-compliant choice?
    • How would the conclusions change if the weights of the objectives were different?

Featured Insight //

How Useful Are ESG Questionnaires?

We discuss the challenges with interpreting voluntary, self-reported data and the pros and cons of using case studies to evaluate ESG credentials.

Read Now >>

More Than Just ESG

Explore how we power better due diligence across multiple asset classes.

Next STEP Read about the advanced technology behind Empirically's capabilities, or book an introductory discussion.