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Trillium Writes Case Study in PRI’s Latest Guide to ESG Integration for Equity Investing

pri-coverBoston, MA // September 9, 2016
 — Principles for Responsible Investment (PRI) launched “A Practical Guide to ESG Integration for Equity Investing”, a report helping asset owners and investment managers apply ESG integration techniques to their investment strategies. The publication includes a case study authored by Trillium Research Analyst Jeremy Cote, which analyzes our approach to integrating board diversity into investment research practices.
Produced by the PRI Integration Sub-Committee, the report utilizes insights and case studies to demonstrate how asset owners and investment managers can integrate ESG research into fundamental, quantitative, and smart beta investment strategies. The sub-committee is comprised of asset owners and fund managers in the SRI field who demonstrate leadership in ESG integration.
Jeremy Cote, a member of the Integration Sub-Committee since 2015, presented our use of an adjusted discount rate in the valuation of eBay’s corporate governance. After discovering potential for improvement in its corporate governance through greater gender diversity on its board, we used a discounted cash flow valuation model to demonstrate the change in equity value if the company improved the number of female board members. Greater board diversity is essential to corporate governance and long-term financial performance. Jeremy states:

Assessing gender diversity at the board level is a fundamental aspect of our governance related research. This is a great example of the kind of ESG integration work we engage in as part of the investment research process. In the case of eBay, a discount rate adjustment was made as part of the valuation analysis to reflect lower company specific risk.

The report provides a framework that will help investors integrate ESG factors into analysis and facilitate dialogue about the increasing relevance of environmental, social, and corporate governance issues into investment practices.
Read the complete report here.
About Principles for Responsible Investment (PRI)
Principles for Responsible Investment (PRI) is an international network of investors who work to understand the implications of environmental, social, and corporate governance (ESG) issues as it relates to investment and ownership decisions of its signatories. After the PRI launched in 2006, Trillium joined in 2007, becoming one of the earliest U.S. signatories.
The information provided in this material should not be considered a recommendation to buy or sell the security mentioned. It should not be assumed that investments in such security has been or will be profitable. To the extent a specific security is mentioned, it was selected by the authors on an objective basis to illustrate views expressed in the commentary and it does not represent all of the securities purchased, sold or recommended for advisory clients. The information contained herein has been prepared from sources believed reliable but is not guaranteed as to its timeliness or accuracy, and is not a complete summary or statement of all available data. This piece is for informational purposes and should not be construed as a research report.