Despite pandemic, more alts firms seek data to invest for the greater good

S Factor Co. Founder Bonnie-Lyn de Bartok remains busy these days, and is finding a rapidly growing set of clients eager to get real-time social screens – alternative investment firms.

In this time of social distress, she is working on contracts with hedge funds, trend followers and quantitative investment firms hungry for data sets not only on social impact but now on what our new shared normal means for the bottom line.

She has spent more than two decades refining and creating research on social impact and how companies can do better by doing good.

Global pandemic arrived at the worst time for managers just starting to implement ESG factors into their investment process. Still, at S Factor the current market uncertainty does not mean there aren’t even more new data sources related to COVID-19 firms can use in order to manage risk.

She has held webinars on the topic over the last few weeks. A recorded session can be found here.

In some of the early analysis, S Factor found that its newly created S-Factor Pandemic Score signals seem to be five to 10 days ahead of the actual stock performance moves.

The claim may sound bold, but the accuracy is not surprising to Bartok who has spent the last few years revising and streamlining an algorithm to process and analyze data across 74 social themes ranging from modern slave trade to child labor and immigration.

S Factor currently covers approximately 42,500 companies – the bulk of global publicly listed equities – with a minimum of five years historical data (10 years for some industries). The data allows the user to drill-down into standardized, norms-based social risks and impacts across a company’s operations and throughout its supply chain, according to Bartok.

Now though through the confluence of technology, larger data sets and greater interest in ESG on the part of investment firms, her work has picked up even more as de Bartok now is taking the knowledge she’s gleaned from 20-plus years working at NGOs, non-profits and advising heads of state to offer a unique set of social screens that now too includes coronavirus inputs.

S-Factor only recently began offering a real-time data set on how companies are managing the pandemic as it relates to their employees and the communities where they operate. The data is then used to come up with a S-Factor Pandemic Score that presents a customized view of specific COVID-19 social activity in a daily/volume feed.

“It’s obvious everyone’s stock is dropping; the scale and duration of this volatility while uncertain in the short term, is very telling using these signals for the longer term,” she says. It is due to the fact they can from the companies’ changes of behavior in contrast to their history and then in exacting specific terms (themes and topics) create a specific pandemic score.

On top of S Factor’s “traditional” social impact rating set, four pandemic topics have been added, overlying dozens of indicators and metrics that have been mapped to best practice frameworks in S-Factor’s database. The pandemic factors include ethics, community health and safety, employees and supply chain.

Companies supply the data and other open source content related to the topics informs the scores for an individual company in real time. For instance, a data piece may include the fact that Amazon pulled more than 1 million items capitalizing on the virus from its site, that Alibaba’s Jack Ma donated 500,000 coronavirus test kits and 1 million masks to the U.S., or that Unilever sent 4,000 of its workers home in India.

In a recently released white paper, de Bartok’s team focused on 45 of the most popular holdings within a universe of 108 ESG funds – including companies such as Amazon, Johnson & Johnson, United Healthcare and Nestle.

The S-Factor Pandemic score is built on companies in each region releasing information on how they are managing the pandemic, countering negative public sentiment regarding labor conditions, pay and disruptions in supply chain with new employee and community commitments made, adjusted policies, vaccines in development and creation of relief funds, etc.

These data points suggest that U.S. companies will outperform European and GEM firms in the short term, according to S Factor.

The S-Factor offering more generally provides company scores, ratings and an index product which correlates a company’s social impact, risks, regulatory compliance, best-practice benchmarks, geopolitical events, sentiment, controversies and financial performance.

While some hedge funds have historically viewed ESG as just another investment bubble, de Bartok says they may be partly right in that it has not been implemented correctly at most firms. Particularly this is due to the fact that the “S” in ESG has not been defined or applied equally across the asset management industry as a whole despite groups like the World Economic Forum and UNPRI working on standardization.

The theory at S Factor is that by putting quantitative benchmarks in place a more standardized definition will eventually come to the forefront. And if the S-Factor Pandemic scoring is any indication, it cannot come soon enough for investors.