With environmental, social and governance (ESG) performance being increasingly tied to long term value and growing concern over the risk of stranded assets, screening and evaluating an organisation’s ESG issues is now a central part of almost all investment processes.
ESG screening for new investments
Whether a new M&A, listed equity or debt investment, Anthesis supports clients in undertaking both high level ESG screening assessments and in-depth company reviews. We do this by blending our own detailed experience of the likely key ESG issues associated with particular industries, process and geographies, and where appropriate, with the use of the Anthesis designed software tool, RiskHorizon. We assess the commercial and financial implications of sustainability, social and governance factors in any investment process or portfolio.
With new investments, we can undertake high-level ESG screening that can reveal potentially critical findings and is recommended to be undertaken as early as possible in the deal origination or due diligence processes, in order to allow for these identified issues to be challenged in detail during the transaction.
ESG screening for existing portfolios
We use the same high-level ESG screening approach to evaluate existing portfolios of investments for assets with current or future ESG risk issues. For instance, this could be associated with exposure to climate change or social issues with high reputational risks such as child labour or poor working conditions, in order to prioritise risk management actions.
With listed equities, we combine the same use of our professional experience and software, together with a specific understanding of the methodologies and nuances of the ESG ratings, such as MSCI and S&P. This ensures we provide the most robust assessment of actual performance and risk.
Where ownership or shared investment allows us to work with management to improve performance, Anthesis undertakes more in-depth “Portfolio Company ESG Reviews”. These will often involve helping to set formal key performance indicators KPIs, with clear action items or targets for improvement.
RiskHorizon, designed by Anthesis, facilitates early screening across a range of legacy and future ESG risk scenarios to model the risk and opportunity landscape in the transaction, so that they can be subsequently evaluated during due diligence. It is a ground-breaking, cost-effective, web-based tool spanning millions of data points from more than 175 countries, covering 30+ global risks (Economic, Environmental, Technical, Social, Geo-Political).
How we do it
- Leveraging professional experience and software tools to screen for potential ESG risk exposure via two pathways: industrial sector and geographical region.
- Applying our extensive due diligence experience and the subject matter expertise of colleagues when identified risks require deeper analysis.
- Providing specific advice on how to improve ESG rating scores, mapping actions to the Sustainable Development Goals (SDGs) and/or identifying Task Force on Climate related Financial Disclosure (TCFD) aligned reporting metrics.
- Holding workshops with management teams to build trust and seek to set out improvement strategies that reduce risk and enhance value.
We wanted the ESG screen as we were keen to understand the definition of ESG and to see the criteria you would be using. We were also interested to see how others would view us through this lens. The Anthesis screen provided us a with a “mirror”. The value to Neste was that it confirmed we are on a right track to addressing ESG issues. It also helped us to identify some potential improvement opportunities, several of which we are working on, and others that warrant further evaluation.
I have worked with Anthesis for many years. They have a depth of ESG understanding and expertise, allowing real analysis and advice on the emerging issues that are becoming increasingly material to our clients. What sets them apart is their willingness and ability to apply this, together with technology solutions, to enhance the quality and speed of their reporting.
We'd love to hear from you
Anthesis has offices in the U.S., Canada, UK, France, Ireland, Italy, Germany, Sweden, Spain, Portugal, Andorra, Finland, Colombia, Brazil, China, the Philippines and the Middle East.