Bloomberg's Push For Corporate Sustainability

Why Bloomberg broke into the business of measuring other companies' good deeds.

SOON AFTER Bloomberg's sustainability director, Curtis Ravenel, launched an initiative to green the company's operations in 2006, he began to wonder: How do other businesses measure their impact on the environment? Do they report it to the public?

Before long, he found himself perusing corporate sustainability reports, released by many firms not just to brand themselves as "green" but also to cater to socially responsible investors. A lightbulb went off: He asked his colleagues whether Bloomberg, whose business is based on disseminating corporate data to the financial sector, collected this pile of information for its clients. The answer was no.

It turned out the company had been ignoring a potentially valuable area. "It was something our European colleagues had pushed for some time, but socially responsible investing was too small [a customer base]," Ravenel, 42, explains. "It just never made it up to C-level."

Well, he thought, I'm C-level.

Ravenel's curiosity had drawn him into an expanding corner of financial analysis called environmental, social, and governance, or ESG. ESG traditionally hadn't been factored into invest-ment decisions. At most, it was viewed as "extra-financial" data -- whether the company has a human-rights policy, or the percentage of women or minorities on its board.

But to its proponents, ESG is less concerned with social responsibility than with profits. If a company treats its employees well, for instance, it should have less turnover and lower HR costs; if a manufacturer gets serious about safety, it can avoid expensive lawsuits. There's increasing evidence -- and, correspondingly, a growing belief among portfolio managers -- that companies taking such factors into account are forward-thinking and well managed, and therefore places investors should consider.

The biggest indicator in the ESG matrix right now is environmental impact. "The financial community likes the E because it's easy to quantify," Ravenel says. "And within E is the big C: carbon." And within that C is another C: cost. Some European countries, such as Sweden and Denmark, tax the carbon emissions of companies with offices there. The EPA's rules to regulate CO2, which went into effect January 2nd, will affect many American balance sheets. If companies wake up one day to find it costs $15 to emit a ton of CO2, a financial analyst considering ExxonMobil would see it emitted 128 million metric tons in 2009. That adds nearly $2 billion to the oil giant's operating costs -- hardly extra-financial data.

Ravenel used this kind of argument to persuade Bloomberg to add ESG data to its terminals. His team spent countless hours assembling and entering data into the system (often by hand) before going live in July 2009. Today, when Bloomberg's 300,000 market-savvy customers turn on their terminals in the morning, they can see ESG data such as greenhouse-gas intensity per sales, water usage, employee fatalities, toxic discharge, and more than 100 other indicators as part of their basic package alongside the rest of the Wall Street alphabet soup. (The ESG data does not cost extra.)

And investors are using it: In the second half of 2010, 5,000 unique customers in 29 countries accessed more than 50 million ESG indicators via Bloomberg's screens -- a 29% increase over the first half of last year. "We expect that trend to continue," Ravenel says.

Recently, Goldman Sachs, Deutsche Bank, UBS, Merrill Lynch, and Credit Suisse launched divisions to analyze ESG data from Bloomberg and its ESG competitors. (A number of these competitors have bought one another or merged in the wake of Bloomberg's entry into the field.) "We feel there's enough quality data out there now that we place it on our platform in a variety of ways and from a variety of different vendors," says Bruce Kahn, senior investment analyst of Deutsche Bank Climate Change Advisors.

To Ravenel, this is not only a business success but also potentially an environmental one, because what's measured gets managed. If analysts are paying attention to ExxonMobil's carbon-dioxide use, then the company may try to reduce its emissions -- and maybe create a product that enables other companies to reduce their emissions. "I saw the potential for us to have an impact exponential to what we'd been doing on the operating side with making Bloomberg greener," Ravenel says. "This would dwarf anything we could do to reduce our footprint."

"Every Wall Street analyst has a Bloomberg and looks at it every day," says Adam Kanzer, a managing director of Domini Social Investments, a pioneering shop for socially responsible investing. "Analysts are going to say, 'If Bloomberg thinks this is important, maybe I ought to be paying attention.' "

Companies have begun to collect environmental data more vigilantly -- ostensibly because it helps them identify ways to cut costs. Frank Mantero, head of corporate responsibility at GE, says the company has saved $150 million since 2005 by limiting its emissions. Private equity firm KKR estimates that eight of the companies in its portfolio pocketed $160 million of savings in two years after eliminating 345,000 tons of CO2 and 8,500 tons of wastepaper.

In February, Ravenel raced to finish Bloomberg's ranking of banks based on their green credentials. In a rare moment of calm, he thought about how far ESG has come. "It's gone from us pushing ESG to customers to us getting questions on how to use the data," he says. He laments that not all of Wall Street is yet on board. "ESG ought to be in SEC-required company filings, and until it is, it won't be viewed as material by a lot of people. "Of course," he quips, "a lot of the financial data in there now aren't material either."

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5 Comments

  • ThinkFast

    If Bloomberg wants to look at carbon footprints, how about his own? Bloomberg LP spends so much money flying their sales force around the country all week. Why not locate people according to the customer base's geographical footprint? Oh yeah, that's right, he wants to collect more New York City taxes....

  • mark

    “Within the E is the big C which is Carbon” but also the big C stands for 'Communication'. In understanding carbon and its impact on businesses and the planet it can be aligned to John Grays book "Men are from Mars, Women from Venus” in which case for most corporates carbon then is from Uranus – it’s that far away for many.

    In our experience, over the last 10 years, carbon one of the best business tools to determine efficiency across the board from processing to services. Why spend more when the envio-economics tell you businesses could spend less, and better?

    The value of carbon/ESG comes when you can use this as a currency to promote more efficient production, with increasing carbon legislation and taxation, production and services may shift globally, ESG may have its day but we have to get over that sustainability is not just green a fluffy but plays hard ball economics.

    Mark Clayton
    Chief of Staff - Carbon Guerrilla
    www.carbonguerrilla.com

  • Robert Clarke

    I applaud Bloomberg's efforts in corporate sustainability. It's worth noting that in many senses - the train has left the station on sustainability reporting. Corporate scorecards, voluntary reporting to GRI and CDP among others, and various countries' compliance legislation is compelling a growing number of businesses to report, and then criticaly - do something about the numbers they report in terms of reducing risk and operational costs. The trend has been apparent for 5 years now.

    It's also worth noting that Ecodesk, a provatelly owned and financed busienss based in the UK, holds the largest number of publically available data profiles on organisations worldwide, and enjoyed over 28,000 unique visitors over the same period quoted in this article - 5 times Bloomberg's total.

    Robert Clarke
    CEO, Ecodesk.
    www.ecodesk.com

  • Brooke B Farrell

    So glad to see business at all levels embracing the opportunities associated with "ESG". From entrepreneurs to wall street, the business community is finally coming around in a big way. Hoorah!

    @BrookeBF from @RecycleMatch

  • Peyton Fleming

    Bloomberg's move into the environmental, social and governance (ESG) space, coming as it does directly from the C-suite, validates the business and investment case for sustainability. Bloomberg's decision to present corporate ESG data, based on the Global Reporting Initiative framework, right alongside financial data on its ubiquitous terminals confirms that information on sustainability is unquestionably material to investment decision-making -- and therefore needs to be ubiquitous on corporate board and management agendas.

    Companies, investors, NGOs, regulators and other key stakeholders seeking guidance on how to implement (and advocate for) integration of ESG factors into core business and investment strategy can look to the Ceres Roadmap for Sustainability, which charts the vision and course to a sustainable economy for the 21st Century.

    Disclosure is one of four key action areas the Roadmap focuses on. Bloomberg's dashboard of ESG indicators perfectly exemplifies best practice on this front and we expect it will help drive companies to sustainability performance improvements, such as lower carbon emissions and reduced energy/water use. (Performance is another of the four topics the Roadmap covers, along with stakeholder engagement and governance.)

    A hugely important factor in all this is making sure investors use Bloomberg's ESG data to evaluate which companies are well positioned - or poorly positioned - on emerging sustainability challenges such as climate change.

    For more info, check out the Roadmap online here: http://www.ceres.org/ceresroad...

    Peyton Fleming

    Senior Director, Strategic Communications
    Ceres