Columbia Threadneedle Develops Proprietary ESG Tool

Columbia Threadneedle Investments has developed a proprietary company rating system that it claimed was “putting the ‘investment’ into responsible investment”.

The tool combines an assessment of how well a company manages its “financial stewardship” with a view of how well it manages its environmental, social and corporate governance (ESG) risks. Both aspects are combined into a single, forward-looking rating from ‘one’ to ‘five’.

The company’s equity portfolio management teams began using the research tool in 2018 and it is being rolled out to fixed income investment teams this year, it added.

Iain Richards, who heads the asset manager’s global responsible investment team, which helped develop the tool, indicated that it was at least in part a response to feedback from asset owners.

“Today, investors are seeking to assess, understand and measure the wider implications of their investment choices,” he said. “They have access to multiple third-party ESG ratings from research houses, which offer widely divergent assessments.

“Feedback from asset owners highlights frustration at the lack of clarity and investment relevance of many current ESG approaches, and the resulting uncertainty that exists concerning the likely impact on financial returns of non-financial factors.

“We have sought to address these limitations and provide our portfolio managers with an additional tool to best identify the value generated by well-run, sustainable businesses or those that are on the path of improvement.”

Mac Ryerse, lead analyst for the US in the responsible investment team, said the system used “big data” and cloud computing to “systematically provide focused information” to the company’s investment analysis and research.

Columbia Threadneedle has €412bn under management globally, according to IPE’s 2018 Top 400 Asset Managers survey.