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A poor score, the pain in Spain and what will happen if Trump is dumped


This week Keeping Tabs brings you thoughts on the inadequacies of ESG data, the US election and why Spain is in such a bind.

One of the handy coincidences that  the timing of the dawn of big data has brought is that it has arrived at a point in history when the world faces some even bigger problems. Battling the coronavirus is one but so is dealing with climate change. Some cynics, of course, might think that not battling the bug might actually solve some of the world’s problems given its effect on pollution pumping, resource draining human activity, but that’s a whole other topic.

Sasja Beslik, who runs sustainable finance at J. Safra Sarasin, a Swiss private bank, thinks there is a problem with ESG data, however. He argues that it does not capture real world impact in a post for ESG on a Sunday.

Beslik argues that vast amounts of data are vital in building resilience to all manner of threats, but that the information we have for ESG only reflects what is available rather than what is important.

He is particularly critical of ESG data providers which provide combined scores for companies but cannot agree on what bits of data matter the most.

“It can create a false sense of confidence among investors who don’t really understand what lies behind the numbers, and therefore don’t really understand what they’re buying,” he writes. “The equivalent in financial analysis would be to evaluate the quality of a company by looking only at its balance sheet.”

It can hardly be a surprise that busy financial markets people look for one simple, authoritative data point given the complexity at stake. That is a perfectly human trait and has earned credit rating agencies vast amounts of money down the years, even allowing them to survive having their reputations ruined during the subprime crisis of 2007-08.

Beslik believes we need more data around companies “setting and implementing ambitious targets” and greater detail about how different bits of a firm are coping with it all.

The rewards for getting that measurement right could be huge. “Third party verification of ESG data is next big game in the global financial industry,” says Beslik. 

GlobalCapital pointed out this week that too many in the equity markets have stopped worrying about Brexit, having allocated all of their worry on Covid-19.

Well, Deloitte cannot be lumped in with them. It has published a report about dealing with both at the same time. It talks about supply chains, the impact on staffing and workplaces and resources.

'Perfect storm'

Also of pressing concern is the US election on November 3 and its aftermath and the thinkpieces are being published thick and fast.

Eric Posner, a professor at the University of Chicago Law School has a view on what the election is really about, which he shared with Project Syndicate.

According to legal eagle Posner, next month’s poll isn’t about Donald Trump or policy, it’s about the US’s entire constitutional system, no less.

Does Posner have a point, or is he guilty of that courtroom drama trope of taking one issue and using it to put the whole system on trial?

“The real question that America faces concerns the role of the national government in the life of the country,” writes  Posner, who sees the chaos of the last four years as just the latest episode of populism in US politics to have occurred since the 1776 revolution.

“Trumpian populism should be divorced from Trump, who has ridden a political wave that he neither initiated nor controls,” continues Posner. “Its main source is anger at the advance of cultural liberalism, economic stagnation, and inequality – all of which have been blamed, with more or less justice, on national elites and the institutions they dominate. This same wave helped the relative outsider Barack Obama defeat the establishment candidates Hillary Clinton and John McCain in 2008.”

Posner believes populist waves burn themselves out in the end when they run into the contradictions inherent in having become the powerful elites they once railed against. Whether that moment will come next month, regardless of whether Trump wins or not, remains to be seen.

Meanwhile, somewhat more prosaically, CMC Markets has been mulling on what a win for Democrat challenger, Joe Biden, will do for big tech.

Democrats have made more noise than Republicans of late about reigning in big tech, which has come to be the major driver of US equity index performance. CMC point out that Biden’s running mate has criticised the industry over various matters and that “greater policy action on competition policy, antitrust enforcement and cybersecurity” is likely, not to mention higher taxes.

Finally, El Pais, has lamented the “perfect storm” that dragged Spain to the bottom of the heap. The Spanish newspaper blames the country’s economic 'rona woes on its heavy reliance on tourism, having too many small businesses that lack the scale to cope with adversity, too many temporary jobs and a government with no fiscal headroom as the reasons for why the pandemic has caused GDP to fall by the most of all the advanced economies.

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