“That’s because much of the data on environmental, social, and governance issues — ESG, in the investment world’s shorthand — comes from companies themselves. “The question is always whether ESG information is more of a PR marketing story,” says George Mussalli, chief investment officer and head of research for equities at PanAgora Asset Management, which describes its approach as fundamental quantitative investing. “You don’t just want to buy companies that have the highest ESG rating, you want to find the firms that are improving the most.” To try and dig deeper, PanAgora says it uses natural language processing tools to analyze how companies talk publicly about their ESG performance and get a sense of whether they’re backing up their claims with action. For example, a company that uses more negative-sounding words such as “spill” or “pollution” may be more honest about its problems and diligent about addressing them.”

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