Metzler Capital Markets integrates ESG analyses into its corporate research. In addition to the three factors environmental (E), social (S) and governance (G), Metzler analysts also look at a fourth indicator that measures a company's climate risk. This indicator maps how high a company's current environmental impact is and how compatible its products or services are with Europe's goal of being climate neutral by 2050.
Guido Hoymann, Head of Equity Research at Metzler Capital Markets, explains why Metzler has expanded its traditional financial analysis to include these four indicators. "We believe non-financial factors, e.g. climate risks, provide clear indications of corporate value." In addition, ESG criteria are an important prerequisite for more and more clients when choosing companies for investing.
By analyzing these four ESG indicators, Metzler aims to make any noticeable deviations of a company from the European industry average visible at a glance. "We compare the companies with their European competitors and look at their positioning relative to the industry average," Hoymann says.
A sustainability score is determined from the four indicators mentioned, and a risk factor is calculated. The idea behind the approach: sustainable companies with a good score should have fewer problems obtaining fresh capital. In other words, they would generally have lower capital costs. For less sustainable companies, on the other hand, raising capital would become more expensive. "This should serve as an incentive for companies to become more sustainable," summarizes Hoymann.
Metzler Capital Markets uses data from the German ESG specialist ISS for its analyses. Information on nearly 2,000 European companies and the relevant industries and supply chains are incorporated into the analysis. ISS is an established ESG solutions provider with more than 25 years of experience in providing sustainable investment analyses.
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