Responsible Investing (ESG) Tech and Innovation Fixed Income Video

PRISM: Unlocking the Power of ESG Data

16 September 2024
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      | Research Analyst—Responsible Investing Portfolio Solutions and Research

      For a deeper dive into PRISM 3.0, read our paper, Breaking the ESG Barrier: Empowering Credit Investors Through Better and Faster Data.

      Transcript

      Investors need to integrate financially material ESG risks and opportunities into their portfolios. But that’s no easy matter. Company ESG data, when it exists, can be hard to find and subjective. And there are few global data standards, making apples-to-apples comparisons challenging.

      Investors looking to avoid data issues frequently turn to third-party ESG rating providers. Unfortunately, not only is there huge variability in ESG scores provided by third parties, but those scores often look in the rearview mirror, ignoring companies’ commitments and paths forward.

      That’s why we’ve developed a new approach to credit research that allows our analysts to capture, objectively analyze and consistently evaluate financially material ESG metrics, turning a data problem into a data-driven solution.

      We call this digital ESG scoring platform PRISM 3.0.

      PRISM sources nearly 180 metrics from NGOs, governments and third parties. 

      This data is not only financially material, in our view, but is also clean, to ensure data integrity. That helps minimize human biases and generates more objective company analyses.

      PRISM’s resulting ESG scores allow for meaningful comparison of companies, both within industries and across industries. That’s because PRISM doesn’t try to fit the same generic ESG metrics onto all companies. Because different industries are exposed to different environmental and social risks, PRISM looks at industry-relevant metrics to provide more accurate assessments.

      For example, when analyzing an airline, looking only at carbon intensity may be misleading. Emissions per passenger-kilometer flown better represent an airline’s ability to be fuel efficient.

      Unlike most third-party scorers, PRISM covers 96 to 98% of the universe of investment-grade, high-yield and emerging-market corporate bonds, including small and unlisted companies.

      Lastly, PRISM frees up credit analysts’ time, allowing them to focus on targeted engagements* with corporate issuers to gain unique, forward-looking insights—the kind that power active investing.

      Ultimately, PRISM puts robust, contextualized ESG data at portfolio managers’ fingertips to enable faster—and better—decision-making for client portfolios.

      *AB engages issuers where it believes the engagement is in the best financial interest of its clients.
       

      The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams. Views are subject to revision over time.

      About the Authors

      Kathleen Dumes is a Vice President and Research Analyst on AB’s Responsible Investing Portfolio Solutions and Research team. In this role, she develops strategies and tools for equity and fixed-income teams, including integrating ESG considerations throughout the teams’ research, engagement and investment processes. Previously, Dumes was a research analyst on the Fixed Income Responsible Investing team. Prior to that she served as a portfolio analyst on the Global Multi-Sector Portfolio Management team, where she was responsible for the management and strategy implementation of the firm’s income-oriented credit strategies. Prior to joining the multisector team, Dumes was an associate portfolio manager on the Investment Grade Credit team, focusing on Global and US Credit portfolios. Before joining AB in 2015, she was an investment consultant at Bank of America Merrill Lynch in their Institutional Investment Strategy Group. Dumes holds a BS in finance (summa cum laude) from The College of New Jersey and an MBA with honors from The University of Chicago Booth School of Business. She is a CFA charterholder. Location: New York