Road to ESG Integration – ESG becoming an integral part of Societe Generale research


We are convinced that sustainability has become one of the core components of a company’s intrinsic value and performance. With the systematic integration of ESG criteria to our equity research reports, we aim to provide a practical framework to help investors make informed decisions by combining traditional financial metrics with valuable and actionable analysis of key ESG issues.

Cover image of the "Road to ESG integration" reportFor many years, ESG analysts have been predicting a natural resources crisis driven by significant population growth, rapid economic development, depletion of non renewable resources, and the natural productivity limits of the environment. Together with climate change, this sustainability crisis has now become a reality. If not managed properly, this situation could give rise to even more severe societal and economic turmoil.

The “Road to ESG integration – ESG becoming an integral part of Societe Generale Research” report inaugurates our renewed commitment to Environmental, Social and Governance (ESG) criteria. Our research analysts and strategists have teamed up to deliver integrated research products with an ESG component built in. Our goal in this is to assist the investment community in better understanding what are likely to be the key themes and drivers of change in the coming years.

This report aims to identify and explain which ESG issues are becoming material to business performance and valuations, in order to pinpoint those issues that are already well understood and integrated by the market and those that are not.

It is important to remember that not all ESG issues reported by businesses are, or will be, material. While there is no universally agreed definition, financial analysts frequently use numerical thresholds (a percentage of a company’s revenue or a certain level of change in a company’s share price are common rules of thumb) to assess the financial materiality of a particular issue.

We asked our financial analysts to highlight ONLY those ESG issues that are financially relevant over a “short-to-midterm” investment horizon and outline how they plan to further include such issues in valuation and target prices. In our exchanges with financial analysts, we found that quite a few of the social and environmental issues typically identified for each sector are ultimately not material.

Our findings show that a number of major ESG issues have indeed come to the forefront over the past few years and are having an impact on company cash flows, balance sheets, reputation and, hence, on value. We have built a clear investment rationale for integrating these issues across all of our sector coverage.

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About Societe Generale Cross-Asset Research
Societe Generale Cross-Asset Research is composed of more than 200 Analysts, Strategists, Economists and Quant, combining their expertise into ‘Research-based’ and innovative solutions suited to client’ needs: fundamental studies and expert views, investment ideas and long-term strategies, trade ideas and tactical baskets, thematic and systematic indices, quant solutions. On top of its established UK and Western European base, Societe Generale Cross-Asset Research benefits from a global coverage thanks to its presence in the US and in Asia (Hong Kong, Singapore, Tokyo and Bangalore) and Societe Generale local networks in Eastern Europe.

This editorial contains financial analysis which reflects the opinion of the Cross-Asset Research department of Societe Generale at the date of its publication. It does not necessarily reflect the views of the other departments of Societe Generale nor the official opinion of Societe Generale. This interview is dedicated to institutional and professional investors and is not deemed to be seen and used by retail investors for investment purpose. The viewers shall consult their own financial advisers to make their own appraisal.