Alpha-Centric ESG Research

Kyle Rudden

I am an ESG (Environmental, Social, Governance) analyst with an alpha-centric approach to ESG research. After all, ESG investing is, first and foremost, investing. "Alpha-centric" does not mean apathetic, however. Quite the contrary. I believe global sustainability – i.e., environmental stewardship, social equality, and economic prosperity – is imperative, and private-sector capital is its cornerstone. Private-sector capital still has fiduciary responsibilities. Profitability is necessary for sustained impact. The Triple Bottom Line. People, Planet, AND Profit.

More importantly, you. I value your investment in Smartkarma research, and commit to Insights worthy of your time and money. That means giving ASEAN ESG the attention it deserves, and with Insights that are substantive and differentiated; the intersection of material and under-covered. You can expect investigative research into emergent ESG issues; data-driven analyses of deals (pre-IPO ESG research, ESG-focused M&A consequence analyses, etc.); and trading-oriented ideas like ESG short selling and playing ESG index constituency changes.

I bring both ESG expertise and traditional investing experience, as well as some rather unique perspectives on ESG (a lesson in governance from Enron, anyone?). I spent the last decade exclusively on ESG, researching links to equity returns, credit ratings, cost of capital, and yield spreads. I also contributed to ESG reporting standards (SASB and GRI), and the MBA curriculum (Impact Investing) at the Kellogg School of Management. Previously, I was an Institutional Investor and Wall Street Journal All-Star sell-side analyst at J.P. Morgan.

Please, feel free to contact me about anything.

Facebook and Antitrust - The Beginning of the End for Big-Tech?

Battle Lines Drawn As BABA Builds Out First/Last-Mile Capacity; But Who Will Fund 75+ Bn CNY CapEx?

Oh, the inhumanity of Monopolium Inquisitorum, leviathans made to stand before the judgement of inquisitorial courts. Repent and reform, or burn in everlasting… fine, maybe just shed a few worldly possessions, WhatsApp would be a good start, and stop coveting thy neighbors' data so much.Big technology companies (aka "Big Tech") are the subject of ever-expanding antitrust inquisitions by regulators and courts around the world. In the U.S., informal inquiries into prominent members of FAANG by the U.S. Congress turned into formal antitrust suits, first Alphabet then Facebook.Yesterday, the U.S. Federal Trade Commission (FTC) announced yet another inquiry, this one into the data collection practices of social media companies. It mentioned nine companies by name, a few of which are "new" to this conversation (ByteDance, Tencent-investee Discord, and Snap).This Insight looks at one particular ESG angle to this antitrust stuff. Specifically, the potential for antitrust investigations – not the outcomes, but the process – to trigger ESG ratings downgrades and, in turn, constituency changes to major ESG indices. Summary points, for the cover page:<ul>
<li>Antitrust investigations will inevitably result in additional ESG ratings downgrades, and since most ESG indices are constructed using those ratings, constituency changes are likely.</li>
<li>Index changes might not happen until annual reviews a few months from now, but they are not tied to eventual antitrust outcomes (e.g., breakups) that could be years away, or not at all.</li>
<li>Presently, Facebook and Alphabet are the only U.S. stocks that stand out vis-à-vis the potential for antitrust-driven changes to ESG ratings and/or ESG indices (more so for Facebook).</li>
<li>Let's be honest, we are not talking about Tesla being added to the S&amp;P 500. Even for larger ESG indices, index-linked AUM is comparatively small vis-à-vis broader market indices.</li>
<li>However, one thing keeps it interesting. ESG indices are bloated with Big Tech, many of which are right behind Facebook and Alphabet on the antitrust plank walk.</li>
</ul>Herein, I explain my thought process – antitrust, to ESG ratings downgrades, to ESG index changes – then cover Facebook and Alphabet in some detail (albeit limited by constraints). There is less to say about the other U.S. "antitrust stocks" at the moment, but that may change. More importantly, I am looking into something similar, but related to Asian stocks. So, more to come.

Oh, the inhumanity of Monopolium Inquisitorum, leviathans made to stand before the judgement of inquisitorial courts. Repent and reform, or burn in everlasting… fine, maybe just shed a few worldly possessions, WhatsApp would be a good start, and stop coveting thy neighbors' data so much.Big technology companies (aka "Big Tech") are the subject of ever-expanding antitrust inquisitions by regulators and courts around the world. In the U.S., informal inquiries into prominent members of FAANG by the U.S. Congress turned into formal antitrust suits, first Alphabet then Facebook.Yesterday, the U.S. Federal Trade Commission (FTC) announced yet another inquiry, this one into the data collection practices of social media companies. It mentioned nine companies by name, a few of which are "new" to this conversation (ByteDance, Tencent-investee Discord, and Snap).This Insight looks at one particular ESG angle to this antitrust stuff. Specifically, the potential for antitrust investigations – not the outcomes, but the process – to trigger ESG ratings downgrades and, in turn, constituency changes to major ESG indices. Summary points, for the cover page:
Antitrust investigations will inevitably result in additional ESG ratings downgrades, and since most ESG indices are constructed using those ratings, constituency changes are likely.
Index changes might not happen until annual reviews a few months from now, but they are not tied to eventual antitrust outcomes (e.g., breakups) that could be years away, or not at all.
Presently, Facebook and Alphabet are the only U.S. stocks that stand out vis-à-vis the potential for antitrust-driven changes to ESG ratings and/or ESG indices (more so for Facebook).
Let's be honest, we are not talking about Tesla being added to the S&amp;P 500. Even for larger ESG indices, index-linked AUM is comparatively small vis-à-vis broader market indices.
However, one thing keeps it interesting. ESG indices are bloated with Big Tech, many of which are right behind Facebook and Alphabet on the antitrust plank walk.
Herein, I explain my thought process – antitrust, to ESG ratings downgrades, to ESG index changes – then cover Facebook and Alphabet in some detail (albeit limited by constraints). There is less to say about the other U.S. "antitrust stocks" at the moment, but that may change. More importantly, I am looking into something similar, but related to Asian stocks. So, more to come.

Big Tech Antitrust Scrutiny Could Mean ESG Ratings Downgrades, Constituency Changes for ESG Indices

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Big Tech Antitrust Scrutiny Could Mean ESG Ratings Downgrades, Constituency Changes for ESG Indices