ESG Viewpoint:
Intercontinental Exchange

# RepRisk interviews Lynn Martin, President of Fixed Income and Data Services at Intercontinental Exchange

# March 2021

Lynn Martin: As President of Fixed Income and Data Services at ICE, I am responsible for ICE’s fixed income data & analytics offering, fixed income execution, credit default swaps clearing, and other multi-asset class data and network services. This also includes our ESG data solutions, which can help investors gain transparency into the impact of key ESG issues, uncover opportunities, and manage risk. We combine insights from around the world with proprietary data sourced from our exchanges and our global bond market to help market participants make decisions, operate efficiently, and manage risks and opportunities.

LM: ICE has a long history with ESG-related offerings. Our first set of innovations were with respect to environmental markets, where we helped develop the global emissions markets that continue to be a major venue for carbon trading in Europe and North America. We also provide a range of ESG tools, data solutions, and futures contracts that can help our clients benchmark progress toward ESG goals, integrate climate risk, or increase exposure to companies with strong sustainability profiles.

We’ve spent a lot of time recently focusing on finding more efficient ways to present ESG data to our clients.

We’ve seen a steady increase in the amount of data companies are making available – businesses now proactively share ESG information about their boards, their environmental footprint, and the diversity of their employees. Data providers are responding to this by continuing to expand their data sets. However, with a lack of universal reporting standards and the sheer variety of ESG ratings and data methodologies available, data can often be inconsistent and out of date.

We provide ESG information to our clients in a way that is organized, high-quality, and granular. As a long-time provider of financial data, we understand the need to present structured and, where possible, machine-readable information. Our ICE ESG Reference Data is provided in a consistent format, allowing our customers to compare data points, like-for-like, across the broad universe of industries we cover. We concentrated on sourcing information that may be financially-material, such as greenhouse gas (GHG) emissions reported, board diversity, employee benefits, and many others.

With our team of data specialists, we provide extensive and timely coverage across multiple sources and publicly available documents, such as company-reported documents, regulatory filings, proxy statements, and corporate actions.

We’re excited about our work with RepRisk because our combined offering gives our customers another tool that they can use to help understand a company’s ESG risk, as RepRisk’s data is based on an objective outside-in lens. RepRisk leverages AI and machine learning combined with human intelligence in 23 languages throughout the research process, which helps bring relevant risk incidents not found in company-disclosed information to light.

LM: To me it all comes down to the data – any decision has to start with high-quality, granular information that is flexible enough to be applied to various market scenarios. Different investors will look at different factors around sustainable investing, and bond buyers are looking at more information, particularly around non-financial risks, when making decisions. In the municipal bond market for example, we’re seeing ESG data, specifically the “E” pillar, beginning to influence how bonds are being rated and affect an issuer’s risk profile. With this in mind, we built ICE Climate Risk, a data set that helps investors assess the climate risk exposure of municipal borrowers. The tool uses climate risk analytics and municipal security-level reference data to quantify climate risk exposure.

In corporate securities, ESG and environmental assessments enhance fundamental research and can help investors better understand earnings risk.

When we talk to our customers, they consistently say that granular, comprehensive, and actionable data are universally attractive features that they use in decision-making. That feedback has been instrumental in how we’ve designed the services we provide and led to our inclusion of RepRisk data in our ICE ESG Reference Data.

LM: I think a large part of this shift involves how investors and market participants use ESG in their research when underwriting or analyzing a security. ESG has evolved from a tool to help investors screen out investments that they might not want in their portfolio to a crucial tool to better understand and manage risks in organizations. It is seen by many as a potential way to enhance long-term performance.

The analysis helps market participants better understand the risks and opportunities that exist in securities and companies by considering additional elements that fundamental research alone might not be able to uncover. For many, the way that a company manages its ESG risks may be a barometer for how it might address new risks as they emerge.

LM: Market participants have more and more access to data, but not all data is created equal – it can be inconsistent or insufficiently standardized to enable effective comparison across companies. ICE’s ESG Reference Data is focused on providing organized, granular, and timely data to our customers to aid in their decision-making by providing structured data that allows for like-for-like comparisons. RepRisk’s deep ESG risk content helps sharpen this focus by providing customers with extensive, externally-sourced information about the companies they’re evaluating.

ICE has also developed a responsive and transparent feedback process that enables clients and companies to raise inquiries about our data. This helps us continuously check our data and maintain its provenance.

By combining RepRisk’s “outside-in” ESG data perspective with ICE’s “inside-out” approach of monitoring company disclosures, we believe our ESG Reference Data service provides a comprehensive view that can help identify ESG risks that might be financially material.

Finally, ICE’s platform and our experience dealing with multiple asset classes and securities allowed us to map data to investible instruments, including specific bond issues. This provides investors with insights into the specific securities they are analyzing.

LM: The COVID-19 crisis accelerated existing trends within ESG. We saw how companies managed during a pandemic, which highlighted the importance of the “S” and “G”, and how well they managed their risk exposures. Those that were able to understand those risks, and more effectively allocate their capital, were better able to weather the storm.

We’ve also seen a continued trend of investors and other market participants understanding that ESG is an important component that might provide even more transparency into markets and can help drive investment strategies.

But it’s still early days, and I’m really excited about how this industry will evolve, particularly as we’re seeing the benefits of incorporating these types of metrics into a portfolio. I believe that ICE is uniquely positioned to drive ESG and sustainability going forward, given the various businesses under our umbrella – be it the futures exchanges, the NYSE, or fixed income and data businesses. Our relationship with RepRisk only serves to complement this strategy by providing clients with insights into more than 165,000 companies worldwide that can help drive sustainable decision-making and analysis. ICE has a differentiated portfolio of tools, markets, and data that allows investors to capture exposure to a wide array of ESG factors. ESG has been a crucial place of investment at ICE across the businesses and we are committed to that investment for the long term.