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State Treasurer Deborah Goldberg and the Massachusetts Pension Reserves Investment Management Board (Mass. PRIM) formally began a collaborative project yesterday to improve measurement of Environmental, Social and Governance (ESG) data in the investment and financial sector.
The collaboration with MIT's Sloan School of Management -- called the Aggregate Confusion Project - aims to build on research by scholars at MIT Sloan's Sustainability Initiative to improve the quality of ESG measurement. MIT Sloan and Mass. PRIM announced the collaboration in a September 8 news release. It was formally unveiled at the Mass. PRIM Board of Trustees meeting on Wednesday, September 9.
Recently, certain ESG elements have become top of mind, including a company's contingency planning, the work environment, and how management engages with its workforce and the community.
"We believe companies that operate with consideration to ESG issues are higher quality investments that make a positive impact in the community and yield better performance over the long term," said Treasurer Goldberg, who is Chair of the Mass. PRIM Board. "This collaboration will improve Mass. PRIM's ability to rate a company's ESG impact by providing us with the most current research and enhanced methods for measuring ESG factors when evaluating investments."
There are approximately $30 trillion of assets worldwide that rely on environmental, social and governance (ESG) data. But measurement and divergent ratings on ESG performance from different rating agencies are a challenge and can dampen the ambition of companies to improve their ESG profiles.
Pension funds have a unique vantage point on the challenges of integrating ESG into the investment process, and the importance of solving the measurement problem.
Mass. PRIM will help inform research questions and methodology for the MIT research team, and be a testing ground for innovative approaches.
"We believe we can do better in evaluating companies' ESG performance, and through this relationship with MIT we will have access to the best talent and researchers studying ESG measurement and ratings," said Michael G. Trotsky, CFA, Executive Director of Mass. PRIM. "This is a unique opportunity to work with one of the most prestigious research universities in the world and have early access to this important set of data."