E,S&G factors are all systematically researched as part of fundamental investment analysis. ESG criteria forms part of the evaluation of equity investment risks&opportunities. The relevance and impact of each will vary depending on company, industry sector and geographical footprint, as well as the type of instrument and intended holding period. As such, integration of ESG criteria in the investment process is based on consolidated views of the relevance of these criteria at country, sector and issuer level, with judgement of its implications left to the portfolio manager.
LGIM's ESG proprietary scoring tool is used as a starting point to assess ESG risks across the investment universe. To objectively assess ESG performance relative to sector peers, it incorporates external data and analysis from six different sources. Each ESG category is broken down into relevant subcategories, each weighted according to potential to impact company performance. The overall score for a company's ESG performance is an aggregation of the weighted scores for each subcategory
The score supplements fundamental analysis, analysts use the score as a flagging mechanism to highlight areas of ESG risk and performance that may need further investigation. The score is available on the equity analysts and PMs' Bloomberg platform.