What caught our eye (week 44)
Sustainability Strategy Finance

What caught our eye (week 44)

Risk of taking ESG data as gospel; Health equity - SCD cure?; Is climate risk becoming uninsurable?

Here are three stories that we found particularly interesting this week and why. We also give our lateral thought on each one.

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Risk of taking ESG data as gospel

A LinkedIn post from Alex Edmans caught out eye this week, highlighting a Waverton Investment Management case study on their engagement with Vulcan Materials.

They noticed that Vulcan's water intensity in 2021 was substantially higher than its peers and initially thought that there was a mistake in the units used (e.g. giga litres rather than mega litres). Digging deeper they discovered that in fact the water use had been estimated by a third party and there was very limited metering.

The engagement by Waverton resulted in Vulcan undertaking a number of projects to install meters at some sites to get a more accurate figure.

The story highlights a few issues.

As Alex comments in his post "doubt the data" - implicitly it highlights the shortcomings of how ESG data is often used, as a definitive measure. The 'truth'.

ESG data is a useful part of the decision-making process, but it is not THE process. The data is not a simple 'if X then Y' in isolation. We need to understand what it actually captures and make adjustments accordingly. For example, are the units used consistent? Are they actual measurements or estimates made by either the data provider or the company? Even with Vulcan's new projects the number will still have a degree of estimation.

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