Infographic: Inside ESG Ratings - How Companies are Scored
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Inside ESG Ratings: How Companies are Scored

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The following content is sponsored by MSCI.


ESG Ratings

Inside ESG Ratings: How Companies are Scored

Back in 1972, environmental, social, and governance (ESG) investing had a long way to go.

At the time, ESG research was a nascent field, but it paved the way for the booming investment strategy. Now, it is estimated that one in every three investments in the world will be ESG-mandated by 2025—with assets projected to reach $53 trillion.

This infographic from MSCI shows what’s behind a company’s ESG rating, and where the expansive universe of data comes from.

The ESG Data Universe

Drawing on over 1,000 data points, MSCI ESG Research collects data from a variety of sources:

  • Company filings: Proxy reports, sustainability reports, shareholder results, voluntary company ESG disclosures
  • NGOs: Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), UN Sustainable Development Goals
  • Government: U.S. Environmental Protection Agency, European Central Bank, EU Taxonomy
  • Media sources: Major headlines
  • Alternative data: Geo mapping, water scarcity data, flood risk analysis

Across the expansive data frontier, these are just some of the sources that are drawn on. Typically, a significant amount of data goes beyond what a company will voluntarily provide.

ESG Ratings: The Two Fundamental Questions

During this process, there are two key questions that underlie ESG ratings:

  1. Which ESG issues could cause harm to investors?
  2. Which ESG issues may create opportunities, relative to their peers?

To answer these, MSCI uses a combination of technology and ESG analysts.

Calculating Ratings

Next, a company-specific score is calculated based on three pillars. Here is a snapshot of some of the key issues that fall within each of the E, S, and G pillars:

EnvironmentalSocialGovernance
Climate Change
  • Carbon emissions

  • Product footprint
Human capital
  • Labor management

  • Health & safety
Corporate governance
  • Board

  • Pay
Pollution & Waste
  • Toxic emissions & waste

  • Packaging material and waste

Stakeholder opposition
  • Controversial sourcing

  • Community relations
Corporate behavior
  • Business ethics

  • Tax transparency
Environment opportunities
  • Clean tech

  • Green building
Social opportunities
  • Access to communication

  • Access to finance

So how does this break down for a specific company?

Case Study: Oil & Gas Company

Harnessing artificial intelligence, an ESG analyst looks at a petroleum company to assess its impact on sustainability through a top-down approach. They focus on the most relevant issues including:

EnvironmentalSocialGovernance
Climate change:

Tons of CO2 emitted/$ million annual sales
Community relations:

Indigenous Rights Policy
Pay:

Executive compensation structure
Pollution & waste:

Tons of CO2 emitted/$ million annual sales
Supply-chain labor standards:

Partnering with a diverse set of suppliers on sustainability issues
Business ethics:

Spills, notice of violations, compliance fines

Importantly, this shows just a snapshot of the process, while ESG analysts do the heavy-lifting.

The ESG Ratings Scorecard

Finally, based on a thorough analysis of the most relevant themes and issues facing a company, a final score is assigned. Companies are grouped according to three primary tiers:

LaggardsAverageLeaders
CCC, BBB, BBB, AAA, AAA

These scores can influence investor decisions on many levels:

  • Investors can prioritize a company’s resilience to unanticipated and financially damaging ESG risks.
  • Ratings provide a launching point for shareholder engagement on ESG performance and how investment products are created.
  • Investors can find opportunities in new and existing markets.
  • Investors can make informed ESG decisions in the medium and long term.

Why Do ESG Ratings Matter?

Today, investor demand is one of the chief drivers of ESG investing.

Alongside this, reputational benefits and higher risk-reward tradeoff are playing a larger role in how investors think about sustainability and their investments. But of course, ESG ratings alone are not the entire picture.

By combining ESG ratings and traditional financial analysis, investors can put together a more discerning picture of a company’s risks and opportunities.

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Every Cannabis Product In One Graphic

The cannabis industry is growing by billions every year. This graphic provides an overview of cannabis products and ranks their popularity.

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Every Cannabis Product In One Graphic

There are few markets experiencing growth quite like cannabis, which in 2020 had an additional 7,000 products hit dispensary shelves compared to the year prior. However, for novice cannabis consumers and investors, the different products and their uses can be overwhelming.

This sponsored graphic by Tenacious Labs provides an overview of cannabis products, and is part of a multi-part series that covers different factors affecting the future of cannabis.

Let’s break down cannabis products on the market today.

1. Flower

First, is cannabis flower, which is the ingestible part of the cannabis plant and is the most popular way to consume. It is cultivated, harvested, dried, and cured, as part of the preparation process before making its way to the end consumer. Due to its popularity, it also represents the largest component of the U.S. legal market.

In 2021, some $10.9 billion in dried herb or “buds” were purchased. In addition, pre-rolls generated $2.2 billion, which are pre-rolled products prepared by dispensaries. The psychoactive effects from consuming flower are felt almost instantly, which remains a key appeal.

2. Cartridges, Concentrates, and Extracts

Cannabis concentrates are a growing category which have taken the market by storm in recent years. They come in various forms including raw concentrates, cartridges, and extracts. Preparing them involves removing impurities form the plant, leaving only the desired compounds such as cannabinoids and terpenes.

This highly concentrated form of cannabis results in THC levels of 80-90%, compared to the 10-20% range most commonly found in dry herb flower. Raw concentrates hit $2.2 billion in U.S. legal sales in 2021. And cartridges, which are products intended to be vaped and are typically paired with a battery accessory, were worth $5.1 billion.

The appeals associated with concentrates include a higher dose which results in stronger effects, plus a more discrete experience given they have little to no smell.

3. Edibles

Next, are edibles, where the THC is metabolized by the liver and consumed through infused food and drinks. This leads to an different experience relative to inhaling. For example, the euphoric or psychoactive effects typically last much longer and can take 1-2 hours to kick in.

The legal U.S. edibles market is growing fast. It recorded revenues of $2.3 billion in 2021 but is expected to reach a value of $8.5 billion by 2027. These growth prospects have not gone unnoticed, in fact, the alcohol industry is betting big on cannabis. As of late, waves of investments and acquisitions are occurring targeting cannabis-infused beverages.

A key driver of growth comes from the health conscious consumer who may want to avoid the smoking process altogether.

4. Topicals and Others

Last are topicals and other products. Topicals are CBD-infused non-psychoactive products like lotions, balms, and oils. These are gaining notoriety for their wellness properties including the relief of pain, soreness, and inflammation. However, the market remains relatively modest, with a market value of $200 million. Furthermore, the topicals market appeals to those not interested in any psychoactive effects, and is particularly popular amongst women and pet owners.

Other products include papers, pipes, batteries, and all other accessories, which also provide notable revenues and opportunities.

Measuring Market Share of Cannabis Products

With all these products in mind, let’s take a look at market share. Although edibles, vapes, and concentrates have risen tremendously in value over the years, flower still remains number one, representing 43% of legal sales, followed by cartridges at 20.3% market share.

ProductMarket Share (%)Market Value ($B)
Flower43.4%$10.9B
Cartridges20.3%$5.1B
Edibles9.2%$2.3B
Concentrates8.8%$2.2B
Pre-rolls8.8%$2.2B
Topicals0.8%$0.2B
Accessories8.8%$2.2B

Seasonality also plays a role in cannabis consumption. Since dry flower tends to be consumed outdoors, the data shows that it loses market share during the cold winter months.

The Next Chapter

Cannabis products have come a long way from their early days when variety was considered a choice between an indica or sativa strain. As the industry develops and more money is injected into the space, we should see product innovation accelerate even further.

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Visualizing the Evolution of the Global Meat Market

The global meat market will be worth $1.8 trillion by 2040, but how much of that will plant-based alternatives and cultured meat command?

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The Evolution of the Global Meat Market

In the last decade, there has been an undeniable shift in consumers’ preferences when it comes to eating meat.

This is partly due to the wide availability of meat replacement options combined with growing awareness of their health benefits and lower impact on the environment compared to conventional meat.

In this infographic from CULT Food Science (CSE: CULT), we examine how meat consumption is expected to evolve over the next two decades. Let’s dive in.

Taking a Bite out of Meat’s Market Share

The COVID-19 pandemic triggered a massive turning point for the meat industry, and it will continue to evolve dramatically over the next 20 years. Taking inflation into account, the global meat market is expected to grow overall by roughly 3% by 2040 as a result of population growth.

However, as consumption shifts, conventional meat supply is expected to decline by more than 33% according to Kearney. These products will be replaced by innovative meat alternatives, some of which have yet to hit the mass market.

  • Novel vegan meat replacement: These are meat alternatives products made from plants that resemble the taste and texture of meat.
  • Cultured meat: Also referred to as clean, cultivated, or lab grown meats, cultured meat is a genuine meat product that is produced by cultivating animal cells in a controlled environment without the need to harm animals.

Aside from new meat replacements, biotech will also transform adjacent industries like dairy, eggs, and fish.

The Future of Food?

Meat replacements and cultured meat could overtake the conventional meat market, with cultured meats reigning supreme overall with a 41% annual growth rate (CAGR) between 2025 and 2040.

New technologies for cultivating non-animal based protein will provide one-third of the global meat supply due to an increase in commercial competitiveness and consumers becoming more accepting of these kinds of products.

Meanwhile, conventional meat will make up just 40% of all global meat supply by 2040, compared to 90% in 2025. For this very reason, conventional meat producers are investing a significant amount of capital in meat alternative companies so they can avoid disruption.

Invest in the Revolution

The changing tides in the industry have sparked a variety of undeniable opportunities:

  • Regulatory approvals: Singapore is the first country to legalize cultured meat for consumers, and many more will no doubt follow behind in the coming years.
  • Lower production costs: Cultured meat and dairy have made quantum leaps in reducing production costs.
  • Changing consumer ethics: Consumers are demanding a more ethical approach to factory farming and cultured and plant-based alternative products are becoming a more accepted solution.

CULT Food Science (CSE: CULT) is a cutting edge investment platform advancing the future of food. The first-of-its-kind in North America, CULT aims to provide unprecedented exposure to the most innovative start-up, private or early stage lab grown food companies around the world.

Will you be part of the revolution?

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