ESG Scoring Methodology

Cowen has developed an ESG scoring system founded on a future-facing paradigm, providing our employees and clients with a unified framework for ESG-related conversations.

HOW SCORES ARE CALCULATED

Cowen’s ESG scores are powered by technology and data from Truvalue Labs, a FactSet company. Truvalue Labs uses artificial intelligence to capture the stakeholder view of how companies are performing on ESG metrics, applying the Sustainability Accounting Standards Board (SASB) materiality framework

These data inputs are used to calculate a score for each company, providing Cowen with a uniform way to thoughtfully approach ESG discussions with our clients. Scores appear on the front page of Cowen’s equity research reports.

HOW THE PROCESS WORKS

As one of our core values, sustainability is at the center of everything we do. Leveraging our expertise and knowledge in this area, we formulated an unbiased, common framework that can be used to uniformly evaluate companies’ performance based on ESG criteria. 

Many existing data for ESG ratings are supplied by companies and therefore subject to “greenwashing” (i.e., using data selectively to spin a story that is better than it actually is). Additionally, most ratings systems generally don’t align with SASB, considered an emerging standard by many buy side investors.

Cowen set out to define a system that reversed this paradigm by creating a forward-looking, uniform process powered by technology and data from Truvalue Labs that includes:

  • Capturing unstructured data from more than 100,000 sources, in 14 languages, in real-time
  • Using natural language processing to interpret semantic content from those original sources, signaling an indication of how stakeholder issues and potential controversies may affect a company
  • Applying criteria consistent with established sustainability and ESG frameworks, evaluating companies’ performance on a 0 to 100 scale

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Get in touch with Cowen to learn more about our ESG scoring methodology.