ESG data analytics company, Risk Insights and Instinctif Partners, a strategic communications company, have unveiled an artificial intelligence (AI) and machine learning rating tool that will help investors on the Nigerian Stock Exchange (NGX) to identify the right stocks on the exchange and make the right decisions.
ESG GPS Nigeria is arguably the first AI and machine learning rating tool, developed by Africans for the market on the continent. The technology is capable of processing unstructured data with structured financial information to provide a rating to a listed corporate entity.
“Risk Insights ESG GPS tool considers voluntary and mandatory disclosure, negative news feeds, change in share price, market capitalisation and price earning (PE) ratios over a period to rate a company,” said Anashrin Pillay, Acting CEO of Risk Insights.
A main attraction of the tool is that it gives an investor insight into a company’s sustainability plan and a better understanding of corporate disclosures. In that sense, it enables greater transparency, accountability, ad sustainability while also helping companies on the exchange attract impact investments and lower the cost of funds.
Pillay says that conscious capital that considers society and the environment together with governance is critical for the new era of corporate governance.
The ratings are based on TF-IDF* scores that are completely independent and can be used by investors, corporates, and other stakeholders to identify key ESG risks and opportunities for listed NGX companies.
Risk Insights said it has an ESG database and platform enriched with data for all listed companies on the Nigerian exchange. The companies are rated by sector for a particular financial year. As companies’ integrated reports are published together with other voluntary and mandatory reports, ESG GPS uses an algorithm to gather and rate institutions. The retrospective rating provides a forward view of the companies’ sustainability. ESG rating and disclosure reporting are embedded into strategy and not a point in time statistics.
The ESG factors are a critical aspect of the investment decision-making process, according to Temi Popoola, CEO, Nigerian Exchange.
“However, the prevailing challenges of inconsistency, incomparability, and lack of alignment in standards of ESG reporting frameworks present the most significant concern for investors in their quest to access decision-useful ESG investment data,” Popoola said. “For us at NGX, we are committed to fostering the growth of ESG reporting across our ecosystem.”
He adds that the unveiling of the NGX Sustainability Disclosure Guidelines in 2019, provided a consistent approach for investors to access ESG data from issuers listed on NGX. Risk Insights however is taking it a step further by integrating artificial intelligence and machine learning.
“Sustainability, as a business imperative, continues to increase in importance. Targets such as the 2030 Agenda for Sustainable Development and Net Zero BY 2050, highlight the growing demand for attention in the transition to greater sustainable development. Our ambition is to support countries across the African continent, ensuring the African continent’s ability to compete on the global stage,” Pillay said.
