Columbia Threadneedle Investments has developed a ratings system to score companies on responsible investment criteria, claiming that third-party sources of these ratings are “widely divergent”.
The ratings system was developed in-house and combines an assessment of a company’s financial stewardship with a view on how well it manages its environmental, social and governance (ESG) risks.
The tool reflects Columbia Threadneedle’s conviction that prudent management of financial and ESG factors are important to a company’s ability to create sustainable value in the long term, the firm said.
Iain Richards, global head of responsible investment at Columbia Threadneedle, said investors increasingly wanted to assess the wider implications of their investment choices, but added: “They have access to multiple third-party ESG ratings from research houses, which offer widely divergent assessments.”
Feedback from asset owners highlighted “frustration at the lack of clarity and investment relevance of many current ESG approaches”, Richards said. He also said there is uncertainty about 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,” said Richards.
The tool covers 5,500 equities listed globally and can be used by over 100 analysts and research associates at the firm.
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