Alpha-Centric ESG Research

Kyle Rudden

<ul>
<li>On 25 January, the Securities and Exchange Board of India (SEBI) issued a consultation paper regarding a regulatory framework governing ESG ratings and ratings providers in India.</li>
<li>SEBI's framework aims to standardise ESG ratings, increase transparency, and reduce conflicts of interest to improve the quality and usefulness of ESG ratings and derivative products.</li>
<li>SEBI-Registered Credit Rating Agencies such as <a href="https://www.smartkarma.com/entities/crisil-ltd" target="_blank" data-smartkarma-citation="entities:15699:1" rel="noopener">CRISIL (CRISIL IN)</a> and <a href="https://www.smartkarma.com/entities/icra-ltd" target="_blank" data-smartkarma-citation="entities:12560:1" rel="noopener">ICRA (ICRA IN)</a> are the focus, but other entities and products (e.g., ESG indexes/indexers) are under its purview.</li>
</ul>


On 25 January, the Securities and Exchange Board of India (SEBI) issued a consultation paper regarding a regulatory framework governing ESG ratings and ratings providers in India.
SEBI's framework aims to standardise ESG ratings, increase transparency, and reduce conflicts of interest to improve the quality and usefulness of ESG ratings and derivative products.
SEBI-Registered Credit Rating Agencies such as CRISIL (CRISIL IN) and ICRA (ICRA IN) are the focus, but other entities and products (e.g., ESG indexes/indexers) are under its purview.


Regulating ESG Ratings in India: Outline of SEBI's Proposed Regulatory Framework

<ul>
<li>On 23 November, the International Organization of Securities Commissions (IOSCO) released a framework aimed at greater oversight and accountability of ESG ratings and data providers.</li>
<li>Generally, this is a positive for ESG investing. Implications for specific stocks, however, are still vague and depend on how regional regulators interpret and implement IOSCO's suggestions.</li>
<li>That said, one of IOSCO's concerns – conflicts of interest – could affect certain ESG ratings and data providers, especially those owned by the "Big Three" credit rating agencies.</li>
</ul>


On 23 November, the International Organization of Securities Commissions (IOSCO) released a framework aimed at greater oversight and accountability of ESG ratings and data providers.
Generally, this is a positive for ESG investing. Implications for specific stocks, however, are still vague and depend on how regional regulators interpret and implement IOSCO's suggestions.
That said, one of IOSCO's concerns – conflicts of interest – could affect certain ESG ratings and data providers, especially those owned by the "Big Three" credit rating agencies.


ESG Ratings and Data Providers Subject to Greater Oversight Under IOSCO Framework

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Daily Mail & General Trust / Event-Driven

<ul>
<li>
Lord Rothermere has agreed to pay 255p a share for <a href="https://www.smartkarma.com/entities/daily-mail-general-trust-plc" target="_blank" data-smartkarma-citation="entities:21904:1" rel="noopener">Daily Mail &amp; General Trust (DMGT LN)</a> plus debts, up 1.6% from an £810 million or 251p a share proposal first made in July. The deal will be financed with cash from the cash element from the special dividend.
</li>
<li>
The consideration, worth 1263.3p/share as of 2 November (up from my 1,131p estimate in July), 39% premium to the 3-month VWAP, is broken down as follows: 255p/share for the share capital of DMGT + Special Dividend: 568p + 0.5749 Cazoo shares + Final dividend worth 17.3p/share.
</li>
<li>The deal will close, in my view. Gross spread as of 10 November was 8.5%. Recommendation is long DMGT LN. The risk is a declining share price of Cazoo, so 0.5749 Cazoo shares may be shorted per DMGT share to lock in the spread, but the hedge should be adjusted downwards if the share price of CZOO rises above the equivalent of 738p, as RCL will deliver a lesser proportion of CZOO shares.</li>
</ul>



Lord Rothermere has agreed to pay 255p a share for Daily Mail &amp; General Trust (DMGT LN) plus debts, up 1.6% from an £810 million or 251p a share proposal first made in July. The deal will be financed with cash from the cash element from the special dividend.


The consideration, worth 1263.3p/share as of 2 November (up from my 1,131p estimate in July), 39% premium to the 3-month VWAP, is broken down as follows: 255p/share for the share capital of DMGT + Special Dividend: 568p + 0.5749 Cazoo shares + Final dividend worth 17.3p/share.

The deal will close, in my view. Gross spread as of 10 November was 8.5%. Recommendation is long DMGT LN. The risk is a declining share price of Cazoo, so 0.5749 Cazoo shares may be shorted per DMGT share to lock in the spread, but the hedge should be adjusted downwards if the share price of CZOO rises above the equivalent of 738p, as RCL will deliver a lesser proportion of CZOO shares.


Independent research on the U.S. markets, Baptista Research

Baptista Research

Independent research on the U.S. markets

Baptista Research is an independent financial research house focused on the U.S. markets. We provide equity research as well as credit research reports on the top-listed U.S. companies with most of our focus on technology, consumer goods and services, automobiles, industrials, oil and gas, pharma, and healthcare. Our research has served more than 3000 institutional investors including mutual funds, hedge funds, banks, family offices, and various buy-side firms. We operate a research subscription service where institutions, as well as retail investors, can have priority access to all our research. We also have a wide distribution of our research reports across some of the top global financial platforms. Apart from equity research and credit research, we also provide advisory services with respect to mergers & acquisitions (M&A), private equity/ venture capital fundraising, valuation reports, and investment management services for corporates.
Baptista Research is owned and managed by Ishan Majumdar, an ex-Venture Capitalist/ Investment Banker, a Chartered Accountant, and a Masters’ degree holder in Management from HEC Paris. Ishan has nearly a decade of experience in Mergers and Acquisitions, Leveraged Buyouts (LBOs), Venture Capital Investing, Corporate Strategy, and Valuation in front-office roles at the likes of BNP Paribas CIB, Credit Agricole CIB, Groupe Danone, and TIW Private Equity. He has worked on and closed multiple acquisition deals, leveraged buyouts, and start-up investment transactions.

Equity Capital Markets

<ul><li>Moody's delivered an exceptional financial result in the second quarter of the fiscal year 2021, surpassing Wall Street expectations.</li><li>Its Analytics business managed to achieve the highest ever quarterly revenue, up 15% compared to the comparable quarter of 2020.</li><li>In this quarter, the management launched an industry-first ESG Score Predictor, combining Moody's ESG scoring methodology with company-specific data and predictive analytics in order to produce ESG scores for more than 140 million small as well as medium-sized companies.</li></ul>

Moody's delivered an exceptional financial result in the second quarter of the fiscal year 2021, surpassing Wall Street expectations.Its Analytics business managed to achieve the highest ever quarterly revenue, up 15% compared to the comparable quarter of 2020.In this quarter, the management launched an industry-first ESG Score Predictor, combining Moody's ESG scoring methodology with company-specific data and predictive analytics in order to produce ESG scores for more than 140 million small as well as medium-sized companies.

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:<ul>
<li>Affects firms doing business with U.K. asset managers/owners not just the managers/owners.</li>
<li>Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.</li>
<li>Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).</li>
</ul>This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

Two days ago the U.K. Financial Reporting Council announced 125 successful signatories (aka "not greenwashers") to the revised U.K. Stewardship Code. Signatories are integrating stewardship and ESG (Environmental, Social, Governance) factors into investment decisions, to high standards.Whilst this is ostensibly limited to U.K. pension assets, ramifications are more far-reaching than it might at first appear (one indication is the number of North American and Asia Pacific signatories, in addition to the expected European names). More specifically, the broad relevance is because it:
Affects firms doing business with U.K. asset managers/owners not just the managers/owners.
Is a quasi-blueprint for similar anti-greenwashing initiatives taking root in the U.S. and Asia.
Greenwashing is having an increasing impact on stocks prices (e.g., DWS Group last month).
This is one battle in an emerging global war on greenwashing. The U.S. SEC has its own agenda to fight greenwashing and Asia isn't far behind (e.g., regulators in Japan stepping up scrutiny). There is more to come, and a lot to learn from this including who is (and is not) on the signatory list.

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

United States

Moody's Corporation is a credit rating, research, and risk analysis firm.  The Company provides credit ratings and related research, data and analytical tools, quantitative credit risk measures, risk scoring software, and credit portfolio management solutions and securities pricing software and valuation models.

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Moody's Corp (MCO US)

Regulating ESG Ratings in India: Outline of SEBI's Proposed Regulatory Framework

SEBI's framework for regulating ESG ratings in India aims to improve the quality of ESG ratings and related investment products, and to create an...

Kyle Rudden

ESG Ratings and Data Providers Subject to Greater Oversight Under IOSCO Framework

ESG ratings and data are largely unregulated, despite growing relevance to capital markets. That is why IOSCO decided it is time for greater...

Kyle Rudden

RCL/DMGT: Package Value and Spread

This somehow cheeky bid is likely to close. There's cash for the newspapers, plus a special dividend, partly in CZOO shares. Gross spread is 8.5%....

Jesus Rodriguez Aguilar

Moody's Corporation - Investment Thesis

Moody's delivered an exceptional financial result in the second quarter of the fiscal year 2021, surpassing Wall Street expectations. Its...

Baptista Research

The War on Greenwashing: UK Stewardship Code "Successful Signatories" Has Broader Implications

Telegraph from European front in global war on greenwashing. U.K. names stewardship victors ("not greenwashers"). Many notable casualties. Anti...

Kyle Rudden

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