Exploring the “S” in ESG Investing with Expert Insights

In environmental, social, and governance (ESG) investing, the “S”—representing social factors—plays a critical yet often understated role. While environmental and governance components frequently take precedence, social factors such as diversity, equity, and inclusion (DEI) policies, business ethics, and labor practices are becoming increasingly essential in shaping a company’s reputation.

Investment teams that track ESG integration in the companies they follow must ensure they have a full 360-degree view in their research. This is made easier through artificial intelligence (AI) and a market intelligence platform that aggregates critical data, perspectives, and market outlook in one single place, like AlphaSense. 

Furthermore, AlphaSense’s Expert Insights provide invaluable perspectives on ESG issues, enabling investors to navigate complex social challenges and business practices with confidence and foresight.

In this blog, we explore the importance of tracking social factors in ESG investing and how AlphaSense Expert Insights can help investors track key social issues for the companies in their portfolios.

The Relevance of the “S” in ESG

The “S” in ESG represents the social component, which evaluates a company’s impact on its employees, the communities it serves, and its stakeholders. The scope of social issues within ESG is incredibly broad, but generally encompasses the following:

• Employee relations – diversity, equity, inclusion (DEI), safety, and wages
• Customer relations – data privacy, product safety, and consumer protection
• Community engagement – philanthropy and social impact
• Human rights – supply chain ethics, and labor standards

In recent years, investors, consumers, and regulators have stressed the importance of social responsibility in corporate operations. Companies that prioritize social factors often see benefits such as enhanced brand reputation, more engaged employees, and improved risk management.

Strong social integration reflects a company’s values, elevates its reputation, and ultimately drives long-term value to its shareholders. These companies often invest in employee well-being, prioritize diversity, engage with communities, and implement ethical sourcing. By focusing on the “S,” companies contribute to a positive societal impact and build a sustainable, resilient business.

The social component in ESG investing is increasingly important to investors and their clients because it determines a company’s potential long-term value. By integrating social factors into investment decisions, investors can align portfolios with stakeholder and client expectations and potentially identify opportunities in companies with stronger long-term prospects.

The Evolution of ESG Investing

In today’s investment landscape, ESG factors are no longer niche criteria but essential to informed decision-making. Investors are increasingly seeking to build portfolios with performance-optimized positions that align with- fundamental ESG values. Investing with a focus on ESG goes beyond profitability to align investments with your values and contribute to a more sustainable future.

ESG investing has evolved from a niche practice into a mainstream ideology, with investors increasingly drawn to companies that demonstrate strong ESG practices. According to a recent study by Harvard, ESG investments have shown resilience and positive returns, even in volatile markets such as the COVID-19 pandemic.. This shift reflects a broader recognition that sustainable business practices are integral to long-term success and risk management.

However, navigating the complex world of ESG can be challenging. With prevalent instances of greenwashing (overstated or misappropriated ESG company reporting), along with increased regulatory scrutiny, investors must keep a close pulse on ESG integration practices for the companies they follow. This is where in-depth research and access to reliable expert insights become crucial.

Gaining Expert Perspectives on ESG Issues

Subject matter experts possess extensive expertise within their respective fields or industries and can provide deeper knowledge and critical insights on niche topics. Experts are generally executive-level professionals, industry operators, customers, etc., who can enhance market research with new perspectives and soft, qualitative data.

Expert perspectives on social issues offer invaluable insights for ESG investing. These experts, often industry leaders or academics, provide a nuanced understanding of complex social challenges, their business implications, and potential solutions. Their knowledge can help investors identify social risks and opportunities, assess a company’s social impact, and evaluate the effectiveness of its social initiatives.

Investment research is typically data-driven because quantitative methods provide objective and factual insight into a market or company’s historical performance. However, the qualitative nature of Expert Insights can explain what those key metrics actually mean for any business, market, or trend to help investors validate theses and make well-informed investments.

For example, one expert perspective, found within the AlphaSense expert transcript library, shares that Lululemon has many opportunities to expand its customer base in underpenetrated groups, including men, non-white demographics, and midsize and plus-size customers.

“I think there’s been some success specifically in the market adoption side of things with diversity and inclusion. Again, I think that it’s this mixed messaging. Are we wanting to focus our efforts on acquiring or are we wanting to focus our efforts on creating for the people that already shop us?

That probably has limited the expansionary potential, which goes all the way back to the question that you asked about whether or not Lululemon was losing share. Again, my answer is still basically no, but they’re not getting as much of the new share that’s appearing as they possibly could because they’re just focused on the people that already buy them and new versions of the people that already buy them.”

– Former Senior Manager, Lululemon | Expert Transcript

By incorporating expert opinions, like those of direct company operators, investors can make more informed decisions, mitigate potential reputational damage, and align their portfolios with stakeholder values to drive optimal outcomes.

Discover how AlphaSense Expert Insights can shed light on various DEI issues in our blog, Rainbow or Rainbust? Experts Address Rainbow Washing in Corporate Messaging.

Leveraging AlphaSense for ESG Research

When tracking ESG topics and themes, investment managers require a thoughtful and fine-tuned approach to carefully understand the nuances of ESG dynamics. AlphaSense’s all-in-one market intelligence platform is a powerful tool that facilitates comprehensive research to monitor ESG issues within portfolios.

Below, we explore three key ways that the AlphaSense platform can help research teams conduct comprehensive due diligence and get a 360-degree view on ESG topics.

Conduct Faster Research for ESG Reporting

The current lack of reporting standardization makes accessing ESG metrics challenging. Today, this typically entails manually parsing through disparate sources to locate information on a company’s ESG reporting—a process that wastes time and money.

The AlphaSense platform empowers you to conduct comprehensive ESG due diligence with cutting-edge AI technology to track ESG themes or create a company watchlist. With our powerful AI search capabilities, you can instantly surface the most  relevant insights to fill gaps in your ESG research. 

Investors can search for “DEI” to show how they can do an instant deep-dive on a relevant “S” topic. On the AlphaSense platform alone, there are over 2.1 million mentions of “DEI” within our extensive library of aggregated content and perspectives, eliminating the need to hop from site to site. Everything you need to begin benchmarking is indexed and searchable within one platform.

A search for “DEI” on the AlphaSense platform indicates a heightened trend in document activity over the last 90 days.

To ensure you stay up to date on all new developments, our dashboard tool automatically populates new content on the search topics that are most relevant to you, such as net zero emissions, DEI, biodiversity, or data security. Content on the AlphaSense platform spans across the four key perspectives of research to provide you with a complete picture of the ESG landscape.

Browse by expert title, company name, industry, topic, and other smart search features to monitor keywords and surface insights across the platform easily.

Discover Expert Insights on ESG Trends

Gaining first-hand perspectives from industry experts is essential to understanding the impact of social issues with qualitative insights. Listening to market voices can help investors identify key considerations, assess a company’s ESG integration, and enhance their market research.

AlphaSense Expert Insights offers a comprehensive view of social components within ESG investing, their challenges, and best practices, providing investment teams with the tools they need to conduct sound diligence on the companies they follow.

The AlphaSense expert transcript library contains tens of thousands of transcribed interviews with industry experts, providing actionable insights on a range of topics and industries. The fresh perspectives, available on demand in our library, can be supplemented with a company’s ESG reports to understand the true social impact of its business.

Investment teams can also glean instant insights and SWOT analysis from any expert transcript or document in the platform with our generative AI (genAI) technology, Smart Summaries. These AI-generated summaries allow you to cut through the noise with actionable insights from industry experts to get the gist of any ESG topic quickly.

By leveraging Expert Call Services, investment researchers can dive even deeper into a subject by speaking directly with an expert to discuss factual findings or company ESG reports to add necessary, qualitative context to ESG topics. Additionally, the platform allows you to easily surface relevant industry experts from within the transcript library to engage in a personalized custom call, transforming the way investors access expert perspectives for investment research.

Understand Sentiment Around ESG Themes

With AlphaSense, you can find positive and negative dialogue on any topic in seconds using our sentiment analysis technology. This feature allows investment professionals to identify and quantify levels of emotion around specific topics within the expert transcripts, news, and financial documents available in the platform.

Investment teams can leverage AlphaSense’s sentiment analysis feature to understand the overall sentiment surrounding rising ESG issues and themes by using a boolean operator. For example, you can search for mentions of a specific topic in a positive or negative light (for example, “sustainability” AND “positive”) and filter by expert calls. The resulting snippets populate any positive mention of the topic.

To further understand sentiment, investment researchers can also use company reports as a benchmarking tool and compare them to earnings calls, expert insights, and press for a more well-rounded view of a company’s efforts, all within AlphaSense. For example, even though a company might release an ESG report that appears to be positively or majorly impactful, a press report or article could potentially surface insights they may be overlooking.

The AlphaSense platform allows investment teams to easily investigate a company’s ESG claims and conduct comprehensive due diligence prior to making investments.

Any potential warning signs can be detected early in the process with valuable insights on the AlphaSense platform.

Learn more about ESG benchmarking through AlphaSense in our blog, How to Use AlphaSense for ESG Benchmarking.

Make Informed ESG Investments with AlphaSense

As the focus on ESG intensifies, the “S” in ESG will continue to gain prominence, with social considerations continuing to play a key role in the future of sustainable business practices. AlphaSense provides a wealth of resources and insights to help investment managers make decisions with conviction. Our platform offers access to expert insights, industry trends, and broker research to promote sound analysis and drive informed decisions.

By leveraging AlphaSense’s expert insights, investment teams can supplement their ESG research with qualitative, relevant insights. With strategic ESG investments gaining relevance in volatile markets, investors can comprehensively monitor and evaluate the ESG activities of the companies they follow with AlphaSense.

Leverage AlphaSense to enhance your ESG research with powerful insights. Start your free trial today.