Guest Series: An investment portfolio analysis of the European auto industry’s ESG performance — using WikiRate
George Read, Master of Science candidate in Sustainability Sciences, University of Southampton, conducted research for his thesis using WikiRate. We asked George about his investigation and experience using the platform. Here is what he had to say.
What is your research about?
From the outset I knew I wanted to investigate the sustainability of large, industry leading companies in a field that is of huge importance as the world looks to become more sustainable environmentally, socially and governmentally. I also knew that I wanted to investigate the business and finance surrounding the sustainability of corporations. Fortunately for myself, WikiRate proposed a rough project outline to my supervisor and I and it was perfect. What I needed to do was to pick an industry to look at and finalize my research questions. After searching around, I settled on the automotive industry. This was in part due to there being little prior work on the WikiRate platform surrounding the industry, and in part due to the huge environmental impacts the industry is associated with. But, secretly, the main reason being, I’m a massive car man!
So my research project was all about looking at the European automotive industry from an investor perspective, analyzing, using WikiRate metrics, how environmentally, socially and governmentally sustainable it is currently and whether there is a relationship between company ESG performance and their respective financial performances and returns for investors. The project revealed some very intriguing results; one being that BMW was by far and away the top performer in the 12 ESG metrics looked at. The other companies were Daimler, Peugeot SA, Renault and Volkswagen. Toyota was also used as a point of comparison after it was named 92nd on the Forbes 100 Most Sustainable Companies list in 2019. No significant relationships were found between the ESG and financial metrics, yet the small study size would have somewhat contributed to this. These results and limitations of the study size/scope naturally lead to ample possibilities for future projects to build off this project and explore the automotive industry further.
How did you decide to use WikiRate as part of your research approach and why?
WikiRate acted as a way for me to store all of the raw data needed for my analysis, while being able to generate the calculated metrics needed for my study from the basic formulas I set up. The database meant that I could also use the data other researchers had already collected and uploaded to the platform for my own study, saving time and reducing the research I would have to conduct. The platform also allowed me to study the companies in question from an investor’s point of view, to see which company would be of most interest to socially responsible investors from their ESG scores.
What were some expectations/assumptions you had prior to beginning the research and how did they match the reality?
The platform was exactly what I expected it to be: an open database of key environmental, social and governmental performance metrics for hundreds of multinational companies to increase corporate transparency. However, I was not expecting myself, a post-graduate academic, to be able to add my own study and upload the data I found onto the platform directly. That aspect made me realize how important the platform is for researchers and academics to be able to collaborate and bring their work together to encourage wider corporate transparency.
In what ways could WikiRate help other students in their research?
WikiRate can help other students looking to further expand the existing data on the platform or follow up on the research other researchers have conducted. Metrics and companies will overlap between studies naturally. For example, my study listed possible avenues for future studies to explore. A potential student could find my research project on the platform and develop it further according to their interests, with new metrics, companies and calculations
What is your view on company and investor transparency (and did this change through your research)? Can you see ways investors/companies could use WikiRate or transparent reporting to their benefit?
I can see the WikiRate platform playing an ever increasing role in investor decision making and company transparency. Subconsciously, while conducting my research I was looking at the companies that didn’t reveal the same data that the other companies did in a different light, asking myself why is this the case and why are they not reporting this information in particular? You can’t help but think this is because it would reflect poorly on them. The more that companies are transparent, and the more that investors look into corporate ESG performance, the more the poorly performing companies would have to change. Overall, the use of such databases only benefits the environment and society.
What was your overall experience using WikiRate?
My experience of the WikiRate platform was exceptional. The ease with which one can upload data and add new metrics is a huge draw to the database for potential researchers. The calculation metrics save time and effort for researchers from having to conduct multiple calculations repeatedly. The relationship metric system, as I understand it, is still being developed as the platform grows and so could be of incredible importance in the future for company transparency. Being able to fully quantify and link companies to one another, as well as relationships between ESG performance and financial performance would be of serious interest to investors using the platform. Overall, the WikiRate platform is a brilliant way of documenting and holding companies accountable for their ESG performance.
To see the data researched on WikiRate, the project can be found here.
