RepRisk

RepRisk AG is an environmental, social, and corporate governance (ESG) data science company based in Zurich, Switzerland, specializing in ESG and business-conduct risk research and quantitative solutions.[1][2][3]

RepRisk AG
Private
IndustryInvestment research, ESG risk analytics
Founded1998
HeadquartersZurich, Switzerland
Number of locations
4
Key people
Dr. Philipp Aeby (CEO)
Websitehttp://www.reprisk.com

The company runs an online database of the risk exposure of companies, projects, sectors, and countries related to ESG issues.[4] RepRisk methodically assesses, on a daily basis, risks, allegations, and criticism pertaining to environmental degradation, human rights abuses, child labor, forced labor, fraud, and corruption that can impact an organization's reputation, financial profitability, or lead to compliance issues.[2][3][5][6][7][8][9] Financial institutions and corporations use the database to monitor and assess risk.

The database includes (as of October 2018) over 120,000 companies[10] and 30,000 projects reported to have links to ESG risks.[11][12] The database also analyzes ESG risks related to sectors and countries. It also includes data on ESG issues and topics, over 20,000 NGOs, and over 14,000 governmental bodies.

History

RepRisk was formed in 1998 as ECOFACT, a Zurich-based environmental and social risk consultancy focused on the financial sector. In 2006, its ESG risk database was created at the request of UBS. In 2010, RepRisk split from the consultancy and became an independent company.[12]

Methodology

Research scope and process

RepRisk screens on a daily basis about 140,000 public sources and external stakeholders, including international and local print and online media, news websites, newsletters, NGOs, governmental bodies, think tanks, blogs and Twitter,[5] in 20 languages. This screening is done to identify companies and projects that have been linked to ESG-related risk events. RepRisk monitors 28 ESG issues (for example local pollution, child labor or tax evasion) and 59 topic tags, or "hot topics" (such as palm oil, Arctic drilling, indigenous people, coal, or water scarcity).[3][13][14] The research scope is defined in accordance with international standards and norms, such as the ten principles of the United Nations Global Compact (UNGC).[3]

The analysis process has multiple steps and is entirely rules-based. Artificial and human intelligence help translate big data into curated research and metrics. The first step is the screening of the sources through a proprietary artificial intelligence tool, where risk incidents are being pre-selected through advanced text and metadata extraction from unstructured content and undergo multilingual de-duplication and clustering processes. An analyst then studies the adverse incidents to define the severity and novelty of the event, in line with international standards. The relevant entities such as companies, projects, sectors, and countries, are linked to the risk event and a title and summary are written. After that, the news undergo a quality check, before the data is added to the database, the RepRisk ESG Risk Platform.[12][15]

RepRisk Index (RRI)

The RepRisk Index (RRI) is a proprietary risk metric that quantifies a company's exposure to ESG and business conduct risks. The RRI score can range from zero (lowest) to 100 (highest) and the higher the value of the score, the higher the risk exposure. Companies that have been exposed to higher levels of criticism in the past are less sensitive to new adverse events and allegations, in comparison to a company that experiences a first-time incident. If a company does not experience new criticism, their score will eventually drop to zero over a maximum period of two years.[16][17]

A Current RRI value indicates the current media and stakeholder exposure of a company, project, sector or country. The Peak RRI is an overall risk exposure indicator that indicates the highest level of criticism over the past two years.[18]

The RRI score is calculated based on a number of factors, including the influence of the source of the information, the frequency and timing of criticisms, and the novelty and severity of the criticism.

RepRisk Rating (RRR)

The RepRisk Rating (RRR) is a proprietary risk metric ranging from AAA to D, similar to a credit rating but for ESG risks. It is available for companies only. It combines a company’s own ESG risk exposure with the ESG risk exposure of the countries and sectors in which the company has been exposed to risks. Both the Rating and the RRI are updated daily for all companies in the [null database].[17][19]

RepRisk UN Global Compact Violator Flag

It allows to identify companies that have a high or a potential risk of violating one or more of the ten UNGC Principles. With the Flag, it is also possible to see if the UNGC violations are primarily linked to the operations or to the supply chain  of a company.[20]

External use of data

  • FactSet used RepRisk as their first third party provider of environment, social, and governance (ESG) and business conduct risk data on the new Open:Factset Marketplace Platform.
  • UBS was RepRisk's first client and in 2010, as part of a broader corporate responsibility initiative, UBS expanded its global compliance database to include information gathered about environmental and social risks by RepRisk. The data is applied to companies, prospective sourcing partners and investment clients to identify risks that could impact the bank's reputation and financial performance.[21][22] In 2011, UBS expanded its global compliance database to include information on environmental and social issues provided by RepRisk, a global research firm specialized in environmental, social and corporate governance (ESG) risk analytics and metrics. This was done in an effort to mitigate environmental and social risks that could impact the bank's reputation or financial performance and to simultaneously help globally standardize and systematically implement the firm's due diligence processes. RepRisk data is used in the on-boarding process to screen potential new clients and sourcing partners, alongside periodic client reviews and, also, to evaluate the risks related to transactions in investment banking and institutional lending.[23][24]
  • Dow Jones Sustainability Index (DJSI) / RobecoSAM: RobecoSAM uses RepRisk as part of the Media and Stakeholder Analysis section of its Corporate Sustainability Assessment for the Dow Jones Sustainability Index, in order to identify companies' involvement in environmental, economic and social situations that may have a damaging effect on their reputation and core business.[25][26] Once a company is listed on the DJSI, it is monitored daily for any critical arising issues, which can lead to the exclusion of the company if deemed critical enough. Examples of events that would lead to exclusion include: commercial practices, human rights abuses, layoffs or worker disputes, or catastrophic disasters. This monitoring is supported by RepRisk, a global research firm and provider of environmental, social and governance (ESG) risk data. RepRisk screens media outlets, stakeholder groups and other publicly available sources to identify risks related to these issues. The information gathered is then systematically analyzed and quantified. If a critical event happens, the situation is analyzed by RobecoSAM for the scope in which it reaches. If large enough, the event will be analyzed further based on severity, media coverage, and crisis management. RobecoSAM analysts decide from here whether the company will be excluded from the DJSI. An assurance report is completed by Deloitte to ensure the validity of the company's information.[27]
  • FTSE: RepRisk data is among the ESG data providers used by FTSE in their ESG methodology for various benchmarks.[28]
  • The Norwegian Global Pension Fund selected RepRisk in 2009. RepRisk was selected again in 2013.[29][30] To support the ethical screening process, the Council on Ethics works with RepRisk ESG Business Intelligence, a global research firm and provider of environmental, social and governance (ESG) risk data. RepRisk monitors the companies in the Norwegian Pension Fund's portfolio for issues such as severe human rights violations, particularly regarding child labor, forced labor, and violations of individual rights in conflict areas, as well as gross environmental degradation and corruption. RepRisk has been working with the Council on Ethics since 2009 and in 2014, re-won the tender for ESG data provision for 2014-2017.[31]
  • First State Investments: RepRisk is used to screen companies in their portfolios and for company engagement.[32]
  • BASF: RepRisk data is used in part to screen the suppliers of BASF for ESG-related risks.[33]
  • The Sustainability Accounting Standards Board (SASB) uses RepRisk data as an input for the development of sustainability accounting standards by supporting its evidence-based research.[34]
  • Carbon Disclosure Project: RepRisk's data serves as an input in the evaluation of companies for CDP's Climate Performance Leaders and Water Performance Leaders, which outlines the top companies around the world that are doing the most to combat climate change and to manage their water resources, respectively. RepRisk's data adds to the current evaluation process by validating company-provided information and clarifying how a company's policies, commitments and initiatives translate into performance.[35][36][37]
  • UN-supported Principles for Responsible Investment (PRI): The RepRisk database is used by the UNPRI's Investment Engagement team.[35]
  • Global 100 Ranking: RepRisk's assessment data was incorporated in the sanctions portion of the screening of the Global 100 Most Sustainable Corporations in the World annual ranking and sustainability equity index managed by Corporate Knights Capital.[38][39]
  • World's Most Ethical Companies ranking: RepRisk's data is used as part of the 2015 evaluation process to validate self-reported scores provided by companies who completed the Ethics Quotient survey, the underlying framework for the World's Most Ethical Companies designation published by Ethisphere.[40][41][42]
  • 2014 Newsweek Green Rankings: Newsweek incorporated RepRisk assessments of reputational risk for companies for the "Reputation Score" indicator in their 2014 Green Rankings. The Newsweek Green Rankings are one of the world's most recognized assessments of corporate environmental performance.[43]
  • Ecolab: RepRisk’s Industry and Country Risk scores are available in the risk analysis section of the Water Risk Monetizer developed by Ecolab.

Data products and services

RepRisk data is available in various formats and products. The ESG Risk Platform is RepRisk's online searchable database for ESG risks related to companies, projects, sectors, and countries. The database is used by financial institutions and corporations as a risk research and monitoring tool. As of October 2018, the database includes over 110,000 publicly traded and privately held companies and 27,000 projects reported to have links to ESG risks. The database also analyzes ESG risks related to sectors and countries. It also includes data on ESG issues and topics, over 18,000 NGOs, and over 13,000 governmental bodies.

It is also possible to access RepRisk data via data feeds, exports of quantitative data which can be tailored and which are integrated into a client’s internal systems and processes. These are used to screen and monitor large sets of data in areas such as banking, underwriting, asset management, and supply chain.

RepRisk Benchmarking Briefs benchmark the ESG risk exposure for up to ten companies.

RepRisk Company Reports are PDF reports that outline the ESG and business conduct risks for a single company. Supplier Monitoring Briefs and Portfolio Monitoring Reports are also available. These are PDF reports provided on a monthly or quarterly basis that identify companies in a supplier list or investment portfolio that are most exposed to ESG risks and are most likely to violate internal policies, ethical guidelines, or international standards.

Publications and research

Annual Most Controversial Companies Report

RepRisk releases a yearly ranking of the top ten most controversial companies in the world, related to ESG issues.[44] The ranking is based on the companies that have the highest RRI over a particular year.[21][22][29][45][46][47]

Rank2009[48]2010[49]2012[50]2013[51]2014[52] 2015 2016 2017
1Peanut Corporation of AmericaTransocean LtdTazreen Fashions LtdInternational Federation of Association Football (FIFA)Chonghaejin Marine Company Ruihai International Logistics Co 1Malaysia Development Berhad The Weinstein Company
2Vedanta ResourcesBP PLCOlympus CorpPunta Fa SL (Mango)Takata Corp Uber Mossack Fonseca Kobe Steel Ltd (Kobelco)
3Newmont Mining CorporationVedanta Resources PLCLonmin PLCComigel SASChang Guann Company Samarco Mineração SA Samarco Mineração J&F Investimentos SA
4Rio TintoExxonMobil CorporationNews Corp LtdHSBC Holdings PLCZhongrong Metal Products Takata Corp Jiangsu Changlong Chemicals Co Ltd Appleby Global Group Services Ltd (Paradise Papers)
5WalmartFoxconn Electronics IncSamsung GroupFindus Group LtdUber Blue Bell Creameries LP Daewoo Shipbuilding & Marine Engineering (DSME)/

Unaoil

Stalreiniging Barneveld (Chickfriend)
6SiemensChevron GroupHSBC Holdings PLCFonterra Co-operative Group LtdInternational Federation of Association Football (FIFA) HSBC Private Bank (Suisse) Equifax Inc
7KBRBG Group PLCReebok International LtdGlaxoSmithKline PLCDongguan Shinyang Electronics Sony Corp Rizal Commercial Banking Corp(RCBC) Rolls-Royce Holdings PLC
8ExxonMobil CorporationRoyal Dutch ShellING Bank NVBNP Paribas SAGeneral Motors Volkswagen AG Lotte Group Odebrecht SA
9BP PLCSinar Mas GroupWyeth LLCICAP PLCKT ENS Corp Fédération Internationale de Football Association (FIFA) Volkswagen AG Petroleos de Venezuela SA
10BHP BillitonMagyar AluminiumTeliaSonera ABSamsung GroupNeiman Marcus Group 1Malaysia Development Berhad / Odebrecht SA / General Motors / Honda Motor Company Odebrecht SA Transnet SOC Ltd

Annual Most Controversial Projects Report

Since 2013, RepRisk releases a yearly ranking of the top ten most controversial projects in the world, related to ESG issues.[44] The ranking is based on the projects that have the highest RRI over a particular year.

Rank 2013 2014 2015 2016 2017
1 Rana Plaza Kunshan Zhongrong Metmmigration Factory Rajput Polyester Factory Fengcheng Power Plant Phase 3 Grenfell Tower
2 Pegasus Pipeline Buenavista del Cobre Mine (Cananea Mine) Valenzuela Slipper Factory Hong’ao Landfill (Hong Ao Landfill; Hongao Construction Waste Dump) Ctrip Day Care Center
3 Big Gossan Mine Soma Komur Isletmeleri Mine Vostochnyi Spaceport (Vostochny Kosmodrom) ETP Crude Pipeline Project (Bakken pipeline; Dakota Access Pipeline) Fu Yuan Lu Leng 999 Vessel
4 Four Rivers Refurbishment Project Abbot Point Port Expansion Tia Mia Gold Mining Project Aliso Canyon Natural Gas Storage Facility Brook House Immigration Removal Centre
5 Fukushima Daiichi Nuclear Power Plant Mauna Ocean Resort Angra 3 Nuclear Reactor Sports Direct Shirebrook Warehouse Nord Stream 2 Gas Pipeline
6 Foxconn Zhengzhou Technology Park 2022 FIFA World Cup Hpakant Gyi Jade Mine / Carmichael Coal Mine / Rail Project (Galilee Basin Project) Petroquimica Mexicana de Vinilo (PMV) Plant JalabiyaCement Works
7 Gyama Polymetallic Mine Mount Polley Mine Ilha Pura Olympic Village Agua Zarca Hydroelectric Project OPL 245 Oil Block
8 Mtwara Dar es Salaam Pipeline Qingdao Port Long Lake Oil Sands Project Tongi Packaging Plant (Tampaco Foils) Changwon Jinhae Shipyard
9 Rustenburg Chrome Mine Moscow Metro Formosa Fun Coast Water Park Angra dos Reis Nuclear Complex (Almirante Alvaro Alberto Nuclear Complex) / Jinshangou Coal Mine Guangzhou No 7 Thermal Power Plant
10 San Jose del Progreso Gold and Silver Dan River Steam Station Grand Mosque Expansion Project Imperial Pacific Resort Hotel

Research

  • The Effect Of Bad News On Credit Risk (Research Study): Julian Koelbel, a PhD student at the Swiss Federal Institute of Technology (ETH) in Zurich, used RepRisk data in the research study: The effect of bad news on credit risk: a media based view of the pricing of corporate social responsibility. The paper, which won an Award for Excellence in Responsible Investment Research at the UN PRI's annual Academic Network conference in 2013, highlighted that more negative news on CSR issues are associated with higher credit default swap spreads.[35] The study is published in the Strategic Management Journal.
  • ESG Alpha in China (Research Study): Michael Barnett of the Centre for Corporate Reputation at Oxford University, and Jimmy Chen, Andreas Hoepner and Qian Li from the Centre for Responsible Banking & Finance at the University of St Andrews, used RepRisk data as the basis for their recent research paper, "ESG Alpha in China." The research paper, which investigated the effect of ESG risks on the share performance of Chinese firms and found that ESG criteria can be used to generate alpha for investments in Chinese companies, won the European PRI award in the category of Investment Strategy.[53]
  • Kepler Cheuvreux: Kepler Cheuvreux and Affectio Mutandi included RepRisk data in their Soft Law Violation & Liability research report, one of a series of reports produced by the company surrounding business ethics.[54] Kepler Cheuvreux also featured RepRisk in its “The Responsible Investor Playbook” published in [null]2016.
  • RepRisk and CSRHub published a joint research report in May 2015 on the relationship between perceived CSR performance (based on CSRHub data) and reputational risk exposure related to ESG issues (based on RepRisk data).[55][56]
  • ESG Performance of European investment funds. [57]
  • The effect of bad news on reputation and share price: An emprical survey.[58]
  • Does Corporate Social Responsibility Benefit Society? Jun Li, University of Michigan, Stephen M. Ross School of Business, and Di (Andrew) Wu, University of Michigan, Stephen M. Ross School of Business (2017).
  • The Relationship between Sustainability Performance and Sustainability Disclosure—Reconciling Voluntary Disclosure Theory and Legitimacy Theory[59]
  • How Media Coverage of Corporate Social Irresponsibility Increases Financial Risk[60]
  • Corporate Social Responsibility and Firm Reputation Risk[61]
  • The Price of Ignoring ESG Risks[62]

Partners

In September 2015, it was announced that RepRisk entered into a strategic partnership with Institutional Shareholder Services (ISS) in order to serve asset managers and asset owners.[63][64]

In October 2015, it was announced that RepRisk's data had been made available for research purposes to universities through a partnership with the Wharton Research Data Services (WRDS) research platform at the Wharton School.[65][66][67]

RepRisk data is in part available through financial data distribution providers such as FactSet, Interactive Data Corporation, SIX Financial Information, and SunGard.

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