Case study by Resultante Consultoria

In the spirit of showcasing leadership and raising standards of responsible investment among all our signatories, we are pleased to publish case studies of all the winning and shortlisted entries for the PRI Awards 2020.

Give a brief overview of your project’s objectives and how your approach to the subject matter differed from previous research. 

Resultante worked with institutional investors in Brazil to promote access to, and the effective use of, ESG information. The firm helps each client, whether they are an asset owner or asset manager, to deepen their analysis of ESG issues according to their specific investment culture and approach to asset allocation and stock picking. 

Resultante’s ESG research approach is unique in the region because it can be tailored to each client’s investment culture. It provides a comprehensive database of ESG practices that investors can customise, and to which they can attribute their own weightings. In this way clients can produce an individual ESG score that measures macro trends such as climate, biodiversity, diversity or any other ESG aspect in Resultante’s reports.  

In addition to this, in 2019, Resultante launched its own ESG Research Platform that allows investors to access ESG reports and then compare the ESG performance of invested companies against their sector, peers and over time. 

User experience was a high priority in the development of the ESG Platform. The idea was to customise each client’s platform according to their individual score weightings, and to create profiles that allowed them to see the exposure of their investee companies to macro trends, such as climate risks. This is then complemented by presentations and portfolio analysis by Resultante’s own research team.  

Describe your methodology, including how you addressed macro trends and mechanisms for effecting systemic change. 

Resultante works with a proprietary ESG Research methodology, organised in five categories for each of the E, S and G dimensions. The criteria are based on the most relevant reporting frameworks (e.g. SASB and GRI), sustainability indexes (e.g. DJSI and the Brazilian ISE), local and international academic papers, as well as PRI publications such as the Integrated Analysis, that informs our approach to macro and top-down ESG analysis. 

Bottom-up ESG Research 

Clients can customise Resultante’s methodology, first of all, by weighting the dimensions they consider more relevant in each sector and, second, the aspects they consider more relevant according to their own investment culture.  

Resultante works closely with clients to create these customised weightings, which are then uploaded to the client’s ESG Research Platform. All databases from the current and previous years are then made available in the client’s individual score. 

The analysis and corporate ESG scoring process involves five steps: 

  1. Resultante’s team analyses public documents and media related to the company’s ESG performance. 
  2. The preliminary score is set by evaluating companies’ practices in four levels, according to sector specific protocols, from non-existent to market leader. 
  3. Companies are contacted in case there are any doubts or to check specific initiatives. 
  4. The final score is attributed according to each client’s weighting and uploaded to the ESG Research Platform. 
  5. Resultante’s ESG Research team organises presentations that identify the companies’ risks and opportunities. 

Top-down ESG Research 

After the analysis of corporate practices, Resultante’s team conducts deeper research into the company’s business model and its exposure to macro trends. These are divided into four different dimensions: physical, regulatory, demand and capital aspects.  

We present the final results to clients as a combination of both top-down and bottom-up approaches, with specific analysis for SDGs and other relevant aspects to their portfolio. 

Outline how your findings have been applied in a practical context and their wider benefits for investors or the financial system. 

Local investors have found Resultante’s ESG Research Platform to be a useful tool to help integrate ESG into their investment decision-making process. It is user-friendly and makes it easier for them to access and compare information on different companies. Since its launch Resultante has gained four new investors, including the second largest pension fund in Brazil.   

Resultante’s reports include opportunities for discussion and engagement with invested companies. This includes exposure to specific sector or company risks, as well as opportunities for ESG integration into strategic planning and management practices. The result is that clients have increased their engagement with the companies in their portfolio. This includes using Resultante research for IR teams, and the execution of specific projects for corporate ESG integration. Some examples of engagements involve:

  • Climate risk assessment and carbon pricing impact. 
  • Supply chain management practices and policies. 
  • Corruption and bribery: integrity programmes and governance. 
  • Regulatory changes: for example the ethanol industry in Brazil, regarding RenovaBio’s programme from the Federal Government. 
  • Use of the ESG Score as a stock-picking filter 

Clients use the ESG scores in different ways: according to their portfolio concentration, investment strategy and the maturity of their ESG integration process. Initiatives include: 

  • Use of ESG scores to develop an ESG internal index, that is used as a reference to over and underweight positions in the portfolio 
  • Use of ESG scores as a filter to investment. 

Resultante sees itself as a research provider that not only aids the micro investment research process, but also increases the awareness of investors to macro trends and their potential impacts on portfolio analysis.  

The next steps in this project will be to include macro research in the ESG Research Platform, and translate research into other languages. This will increase the visibility and depth of clients’ understanding of the Brazilian market, as well as their own progress in ESG analysis and integration.