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ESG scores: Transparency and transition in fund management

Leon Saunders Calvert
Leon Saunders Calvert
Head of Sustainable Finance, Lipper and I&A Insights

Investors are increasingly demanding that ESG criteria are factored into their portfolios. To help satisfy this demand, fund ESG scores enable investors to objectively assess the ESG performance of a company or a fund. But how is it possible to achieve a consistent, reliable and unbiased score system?


  1. Objectivity is key in ESG scores to ensure investors take a trusted and unbiased approach to sustainable investing.
  2. Refinitiv Lipper Fund ESG Scores aim to provide investors and fund selectors with independent fund level ESG scores by combining our deep and objective ESG company coverage with the global Refinitiv Lipper Funds database.
  3. Although a universal approach across the industry is ideal, it remains a challenge. We believe offering transparency into the scores is the best approach to finding objectivity.

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How do you determine the most material metrics for measuring the pillars of E, S and G?

With the score a company or a fund receives now being closely monitored, the consequences of a poor rating can be significant.

The pros and cons of ‘relative’ versus ‘absolute’ scores and how to achieve objectivity imply that to establish credibility a thorough methodology is needed, one that can account for many of the biases and indifferences to ESG scores.

Objectivity remains crucial to any ESG score to help investors take a trusted and unbiased approach to sustainable investing.

Refinitiv Lipper fund performance data provides impartial fund performance data in a precise, granular fund classification system

Refinitiv ESG scores framework

At Refinitiv, on the back of this rising scrutiny over ESG scoring, we hosted a roundtable to discuss best practice approaches. We were joined by buy-side ESG professionals, investment banks, regulators, and academics for a consultation and feedback process to formulate our Refinitiv ESG scores framework.

Keeping pace with this growing maturity and sophistication in the ESG investment market, we have remained committed to bringing an array of best-in-class data, analytics and workflow solutions to the market.

We have recently added fund scores from Refinitiv Lipper to our ESG data offering, which aims to provide investors and fund selectors with independent fund level scores.

We have combined our deep and objective ESG company coverage, covering 9k companies representing over 80 percent of global market cap, with our global Lipper Funds database covering 330,000 funds with deep holdings data.

Watch: Discover funds with ESG Scores

Obtaining accurate and objective data

We feel that ESG scores derived with a data-driven approach offer the most accurate unbiased data, while also employing a transparent and open source methodology to show how the scores are calculated

We believe it has been the continuous enhancements to our ESG scoring methodology that really marks our system out. The enhancements include: Our proprietary materiality matrix, transparency stimulation, and addressing company size bias.

These updates are data-driven to ensure, for example, that the assessment of materiality is objective, consistent and accurate, and that it avoids the challenges often associated with subjective materiality frameworks.

ESG Score diagram. Using ESG fund scores for sustainable investing

ESG metrics

Like the pigs in George Orwell’s Animal Farm that proclaim ‘all animals are equal, but some animals are more equal than others’, Refinitiv’s enhanced ESG scoring methodology takes into account that not all metrics have the same importance to every industry.

Key ESG score enhancements. Using ESG fund scores for sustainable investing

For example, carbon emissions of an oil and gas company are a more material data point for investor consideration. While for a social media company does have carbon emissions, they are not a major element of its business model. A more important factor for the latter could be its cyber security policy, for example.

For Boolean metrics, levels of data disclosure on specific ESG metrics in particular industries act as a proxy for the extent of investor driven pressure on company reporting. Levels of disclosure can therefore inform the materiality weighting of data points in each industry.

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For numeric metrics, data is grossed and then divided by industry to establish each industry’s contribution to the total — all using Refinitiv’s global ESG dataset. The proportion of the total determines, on a scale of 1-10, the level of materiality in each industry.

For example, carbon emissions data points are more heavily weighted in the scoring for more carbon-intensive industries. This is not because it ‘feels’ appropriate, but because the global carbon emissions data we have determines how heavily this data point should be weighted based on the industry’s contribution to total carbon output.

Refinitiv’s proprietary ‘magnitude matrix’ assesses materiality and notes the weight of data points for each industry on a scale from 1-10. The magnitude values are automatically and dynamically adjusted as ESG disclosure evolves and matures. Company scores are calculated using a comparison with peers in the same industry.

ESG Fund Scores description. Using ESG fund scores for sustainable investing

We are using our proprietary ESG scoring methodology — which accommodates issues of materiality and transparency stimulation — to create a bottom-up, constituent-based ESG score for all funds which meet the inclusion criteria (70 percent of AUM of the fund must be scored, and at least 10 companies in the fund must be scored).

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Rapidly growing ESG market

Although a universal approach across the industry is ideal, it remains a challenge. We believe offering transparency into the scores is the best approach to finding objectivity to all those material ESG factors that need to be measured to arrive at an ESG score.

As ESG investing continues to gather pace, the scoring systems will become more advanced and sophisticated, and we feel well-positioned to be prepared for these developments.

We have continually evolved and developed our ESG offering, having added Fund Scores to our already well-developed proposition, through the Refinitiv Lipper fund universe.

We are now participating in transitioning the fund management industry towards full transparency of sustainable investing principles. This gives confidence in those seeking ESG mandates, and offers opportunities to pursue competitive advantages in a rapidly growing market.

Refinitiv Lipper fund performance data provides impartial fund performance data in a precise, granular fund classification system