Role and Impact of Research Component 1: ESG is an evaluation framework which prescribes a set of environmental, social and governance factors in the investment decision-making process to evaluate companies and institutions for the purpose of “sustainable investing”. A major challenge in promoting environmental and social engagement for listed firms or even for the society is a lack of benchmarking of the social reward of investments for the asset owners and investors. Especially in Asia, Chinese culture of emphasizing too much on financial returns by the asset owners has been quoted as the single most serious obstacle to achieve ESG integration among investment professionals.

We believe that an effective way to overcome this challenge is to better quantify the value (i.e., utility/satisfaction) of social returns to asset owners and buy-side professionals. By doing so, portfolio managers can better present investment choices that are suitable to the social return and therefore ESG preferences of the asset owners, leading to a wider adoption of ESG integration among asset owners. In short, we believe that this component is critical to the success of the overall ESG intelligence database because asset owners and asset managers need better social return measurements in the ESG integration process.