ESG for You and Me

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New York – In the investment world there are two key market stimuli: regulatory changes and changes in technology. It seems that the regulatory posture towards sustainable fuels and global climate change is about to create a boom in the eco-friendly product world.

Many of the investment banks have already recognized this and are positioning to deliver more ESG data and analysis to their clients. Case in point is the announced equity stake that Merrill Lynch has taken in the Swiss ESG firm Asset4. This, despite the fact that Goldman has already taken a minority stake in Asset4.  It appears from the press release that Merrill will be getting a data feed from Asset4, which is expected to provide internal information for the proprietary research group.  Whether Asset4 will be offered directly to clients is, as yet, unclear.

Other Investment banks are taking action in this growth industry, including Citigroup, HSBC, ABN Amro and Standard Charter, to name a few.

Asset4 is a provider of specialty integrated financial and extra-financial information. Asset4 examines companies on the basis of their economic, environmental, social and corporate governance practices by tracking over 250 relevant factors in 18 categories. It currently covers over 1000 companies, including all the companies in the MSCI European Index. Management expects that it will be able to complete coverage of all 2,700 companies in the MSCI world index by the end of 2007. These include mostly large cap companies (with a few mid cap stocks in the mix) in all the major economic sectors.

Yesterday, Secretary of State, Condoleezza Rice, called on polluting countries (including the US) to reduce greenhouse gases and their reliance on oil. This is a clear win for the Carbon Emissions markets and probably means substantial tax breaks for companies in the space.

In an environment where regulation is clearly gather steam sweetened by the prospect of tax cuts for companies in the industry, the recipe for a massive market move it is not surprising that the ESG research firms are an integral part of the strategy for the sell side.

In the US Market, the biggest players are KLD and Innovest, but we have included a partial list of the firms in the space in the US and Europe.

AIS (Analistas Internacionales en Sostenibilidad), Asset4, Avanzi, Bradford Research, Centre Info, Dutch Sustainability Research, EIRIS (Ethical Investment Research Services), Ethix SRI Adviors, GES Investment Services, Innovest Strategic Value Advisors, Investors Responsibility Research Center, Jantzi Research, Inc., Kayema, KLD Research & Analytics, Oekom, onValues, Trucost, WoltersKluwer

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