Davis Polk reported on State Street's use (for investment, engagement, and proxy voting) of its new ESG scoring platform - the "R-Factor" - which looks to certain ESG data providers (Sustainalytics, Vigeo EIRIS, ISS Governance and ISS Oekom) and the SASB materiality framework for E&S scoring, and an in-house proprietary tool for governance scoring.
In this April 2019 paper: "ESG in Money Markets Bringing Sustainability to Cash Management," State Street describes the R-Factor platform in some detail, indicating it is "designed to address the current limitations of ESG data" (both as relates to company disclosure, as well as the inconsistent methodologies and corresponding data among the numerous ESG raters) "by providing a consistent, transparent methodology that creates standards for disclosure and financial materiality."
Davis Polk advises companies to be knowledgeable about - and potentially focus their limited resources on - the particular ESG data providers their investors are using.
See also State Street's post: "Putting Companies in the Driver’s Seat to Enhance ESG Reporting," our prior reports: "ESG Report & Ratings Providers Basics," and "State Street Releases Engagement Framework & Updated Voting Guidelines" - which includes State Street's approach to voting on E&S shareholder proposals, and additional resources on our Institutional Investors and ESG pages. This post first appeared in the weekly Society Alert!