BlackRock on ESG, big data and the double bottom line
“The bottom line about the double bottom line is that investors don’t have to make performance concessions to achieve sustainable outcomes. ESG data is an indicator of future performance potential and should be incorporated into the investment mosaic of all the different types of data that are used to predict performance.”
That’s the view from BlackRock in a piece titled ‘ESG X Big Data: Solving for the Double Bottom Line’ by Anna Hawley and Jeff Shen. They argue that environmental, social, and governance (ESG) outcomes and future profitability are inextricably linked – in a financial and sustainability double bottom line – and that analytical innovation, including the use of big data and artificial intelligence, can offer investors increasingly sophisticated insights into which companies are likely to outperform others in the long term.
The authors advocate a careful scrutiny of ESG indicators’ contribution to profitability and a comprehensive investment framework. “As systematic investors, we test and validate each insight through a rigorous research process, … This helps see past unsubstantiated environmental friendliness and basic ESG ratings. Most importantly, this scientific approach requires that findings are based in sound economic theory and that each investment decision is additive to a portfolio.”
Read the post here.