Eureden is a large farmer‑owned French agri‑food co‑operative headquartered in Brittany, combining upstream agricultural inputs and advice with downstream vegetables, eggs, meat/charcuterie, dairy, retail chains and labs across roughly 40 industrial sites in France, Germany, Spain and Hungary and generating about €3.7–3.8bn in annual revenue, according to its website and latest integrated report.
Eureden’s main ESG risks stem from legacy health‑and‑safety failings at Triskalia/Nutréa pesticide and feed sites, where French courts repeatedly recognised work accidents and occupational diseases as due to the employer’s “inexcusable fault” in pesticide‑exposure cases, including a worker suicide linked to workplace conditions, alongside other labour tensions, recurring though mostly precautionary food and allergen recalls, an environmental enforcement order against an ICPE site, and structural exposure to climate, biodiversity, animal‑welfare and chemical‑use risks from intensive livestock, pesticides and Seveso‑classified storage. At the same time, the company reports a relatively advanced CSR framework, high levels of external certifications (100% of industrial sites under at least one food‑safety/quality standard), externally assured integrated reporting with group‑wide ESG KPIs, CSR‑linked financing and programmes on pesticide reduction, non‑deforestation soy, climate, water and waste, while stating alignment with UN Global Compact principles without being a listed signatory; no international sanctions listings or OECD complaints involving Eureden were identified in public sources.
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Tokio Marine & Nichido Fire Insurance Co., Ltd. (TMNF) tapped SESAMm for a joint research venture to predict future stock price movements. SESAMm provided various NLP indicators, such as digital sentiment calculated for single stocks or indices (seen as an entity), as well as its experience in machine learning to work on this task.
These studies concluded with two key findings:
Relationships exist between NLP data from news and social networking sites and investor behavior under specific circumstances. Researchers and investors can use the “digital sentiment” as an indicator of investor sentiment to anticipate price changes. They can then use this anticipation for a specific company or, more generally, any entity that can be isolated in a text (like an index).
By focusing on more stressed situations, like the 2015 market sell-off, the U.S.-China trade war, the coronavirus pandemic, and the start of the Ukrainian crisis, we could show that digital sentiment is beneficial in times of significant stress in the market. Digital sentiment more accurately reflects the stress level in these complicated situations. It, therefore, helps to predict stock price movements more accurately in these stressed cases, providing a tail hedge. It’s not biased by an excess of confidence linked to the “central banks put” for instance.
Providing safety and security since 1879
Tokio Marine Insurance Company was first established in 1879. Over the years, it has added products and services, acquired other businesses, and merged with other companies to eventually become Tokio Marine & Nichido Fire Insurance Co., Ltd. Commonly called Tokio Marine Nichido today, the company is a property and casualty insurance subsidiary of Tokio Marine Holdings, the largest non-mutual private insurance group in Japan. Its products and services provide safety and security to its clients and partners, contributing to more fulfilling lifestyles and business development.
One of the company’s philosophies is to be a good corporate citizen and fulfill its social responsibilities, including protecting the global environment, promoting human rights, creating a responsible working environment, and contributing to society and individual local communities. Recently, the Emperor of Japan awarded Tokio Marine Holdings, Inc. the Medal with Dark Blue Ribbon for donating to the Japan Student Services Organization to support students who face financial difficulty during the
COVID-19 pandemic. Individuals, corporations, or organizations are awarded the Medal with Dark Blue Ribbon for their outstanding contributions to the public.
Transforming and accepting the challenge to grow
According to TMNF, “The business environment surrounding the insurance industry is changing at a faster pace than ever due to changes in demographics, advances in technologies, such as autonomous driving and AI, and longer-term trends, such as the intensification and frequent occurrence of natural disasters, as well as further progress in digitalization due to the COVID-19 pandemic.”
“The business environment surrounding the insurance industry is changing at a faster pace than ever…”
“While these changes in the business environment pose a threat, we consider them to be excellent opportunities for transformation and the creation of new value.” So they’ve adopted the concept, “Transformation (“X”) and Challenge to Growth 2023: Aiming to be the company most chosen for quality and its passion.” Ultimately, it strives to support customers and local communities in times of need while contributing to social responsibility. Five social issues that it will prioritize are:
Global climate change and the increase in natural disasters
The increased burden of long-term care and healthcare due to the aging of society and advances in medical technology
Technological innovation and its effects on the environment
Symbiotic society and responding to the novel coronavirus
Industrial infrastructure and how it supports economic growth and innovation
Leveraging a partner with the right technology
To secure and protect its clients’ assets while elevating social issues, Tokio Marine Nichido sought out an edge in the stock market. Under these circumstances, it was fortunate that TMNF discovered SESAMm in 2020 through the Plug and Play Japan program, a platform with an event that connects Japan to markets abroad. SESAMm had presented its NLP alternative data solution, TextReveal®, to which TMNF considered the platform for access to alternative data and sought collaboration with the SESAMm team for a research project.
“SESAMm has the technology to extract sentiment from news data with a neural network.” – Tokio Marine & Nichido Fire Insurance Co. Ltd representative
Extracting relations between NLP data and the financial market
In 2021, Tokio Marine Nichido Insurance began collaborating with SESAMm to develop an AI analytics model for alternative data. It models the effect of news and social networking data on investor behavior for stock and bond markets. In other words, it structures text information into knowledge usable by TMNF.
Monitor risks and topics
NLP data can improve the understanding of the market’s behavior by exhibiting the most important topics over time, with a direct indication of the importance of the topics through the text volume (Figure 1).
Figure 1: Automatic detection of the main topics in the U.S. market since 2015, thanks to topic modeling.
Researchers can also use it to focus on a specific topic or a certain period. For instance, a short analysis of the most frequent keywords in the press, which preceded the market fall during the COVID-19 pandemic, showed the significant predominance of pandemic-related terms (Figure 2).
Figure 2: Most frequent keywords in English S&P 500-related articles between 17 Jan. 2020 and 19 Feb. 2020.
Focusing on the equity market
NLP tools provide specific data, like sentiment, to get more detailed information at the company level and for many underlyings. Indicators for equity indices, for instance, can be calculated and provide a clean sentiment to monitor markets.
In many situations of stress over recent years, such sentiment proved to be an early indicator of the market’s future degradation. For example, there was a time lag of as long as a month between the time COVID-19 became the main news focus and the time it affected the U.S. stock market. By using SESAMm’s technology to analyze news data during this period, the team found that the U.S. digital sentiment had already deteriorated sharply before stock prices reacted (Figure 3).
Figure 3: In 2020, U.S. news sentiment falls ahead of the stock market in response to COVID-19 concerns.
This sentiment deterioration occurred because of the fear of the coronavirus’s spread’s effect on the global economy (see Figure 2). Even with an all-time high S&P 500, U.S. investors didn’t initially consider this risk. In comparison, HSI companies were closer to the coronavirus spread risk. So as a result, HSI investors reacted ahead of their U.S. counterparts. In other words, by using natural language data, it was possible to capture a risk overlooked by U.S. investors but related in the publicly available texts and take action ahead of the market deleveraging.
Generalizing the results to the credit market
Tokio Marine Nichido also expanded the scope of the research to U.S. high-yield bonds index trade. In the credit market, a high yield has a high beta, which makes its risk comparable to the equity market.
Research shows that, on a risk-adjusted basis, the NLP-data-built signal has a positive and consistent performance through the timeline compared to the U.S. HY T.R. index benchmark (Figure 4). Its performance has a low correlation with the index (Figure 5), so the sentiment is diversifying. It not only acts as a diversifier but delivers higher returns than the benchmark when the U.S. High Yield market sold off (Figure 6). As such, the NLP signal diversifies, hedges, and protects against adverse periods. It provides a mechanical pick-up in risk-adjusted return when running alongside traditional strategy.
Figure 4: An NLP-informed signal has positive and consistent performance. The volatility level is the same for both curves.
Figure 5: The NLP signal and market daily performances are de-correlated.
Figure 6: The NLP signal delivers higher performance during adverse periods.
The NLP signal outperforms the index in realistic backtest conditions, including long allocation only, turnover constraints, and trading fees (Figure 7). The quantitative model integrates some macro indicators, but the previous NLP signal induces the main source of outperformance and risk mitigation.
Figure 7: An NLP-informed high-yield strategy outperforms the U.S. high-yield total return index.
TMNF is also applying the research to estimate the Fed’s stance—hawkish or dovish—using natural language data, too. It hypothesizes that the market will be focused on the Fed’s stance on interest rate hikes in the next few years.
“The model developed in collaboration with SESAMm is simple in structure, yet, it’s an orthodox and robust model that uses valid data as input.”
Summarizing the collaboration
In developing models, Tokio Marine Nichido believes it’s essential to consider “what data to consider” and to keep it simple. And TMNF achieved these tenets. The model developed in collaboration with SESAMm is simple in structure, yet, it’s an orthodox and robust model that uses valid data as input which is preferable to a risky over-fitting by increasing complexity.
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To learn more about Tokio Marine Nichido’s case study or to request a TextReveal demo, reach out to us.
Despite its promises, the clean energy sector, featuring companies like NextEra Energy, First Solar, and Siemens Energy, faces significant challenges across ESG fronts. Governance issues include lawsuits over misleading financial practices and greenwashing accusations. Environmentally, the sector struggles with defective technology and product performance failures, eroding trust in renewable energy solutions. Social and labor challenges are also prevalent, including discrimination lawsuits, unsafe working conditions, and customer dissatisfaction stemming from product failures and poor service. Furthermore, the growing threat of cybersecurity vulnerabilities within clean energy infrastructure poses risks to both operational systems and consumer data.
What are the most pressing ESG challenges currently facing the clean energy sector? Read on to find out.
NextEra Energy: ESG Challenges and Legal Disputes
NextEra Energy faces several ESG controversies despite being less exposed than its peers. Governance issues include a $1.2 billion impairment related to the Mountain Valley Pipeline and a $350 million antitrust lawsuit for allegedly obstructing a competitor’s clean energy project. It has also faced legal challenges, notably investigations into its political donations connected to its bid for Jacksonville’s public utility. Environmental concerns involve growing opposition to its solar and battery projects and lobbying against rooftop solar policies, along with protests over its wind and drilling operations in Florida, which are subject to a class-action lawsuit for environmental risks. Additionally, the company is investigating wind turbine collapses and is engaged in legal disputes regarding employee rights, including a retaliation lawsuit and a $500,000 settlement over debt collection practices.
First Solar has been dealing with a mix of ESG challenges. The solar manufacturer is locked in patent litigation with JinkoSolar while struggling with broader industry headwinds like polysilicon oversupply, hurting bookings, and creating manufacturing problems. CEO Mark Widmar has pointed to policy uncertainty as a major roadblock, saying failed climate legislation is hampering domestic solar production. The company is also cleaning house with its Malaysian contractors over unethical labor practices. Despite proposed subsidy cuts dragging down the stock, RBC analysts still see nearly 40% upside potential as First Solar works through these operational and regulatory pressures.
Siemens Energy: ESG Controversies and Operational Challenges
Siemens Energy is facing multiple ESG controversies, including criticism for its reliance on fossil fuels and accusations of greenwashing. Its Siemens Gamesa unit struggles with turbine quality issues, resulting in financial losses, employee layoffs, and legal disputes, including a blocked asset sale in India and corruption allegations. The company is also under legal scrutiny for delays in the Akkuyu nuclear project and past sanctions violations. Additionally, Siemens Energy has been criticized for a data breach involving MOVEit software and vulnerabilities in its products. Socially, it has faced backlash for abolishing its women’s quota in the U.S. and labor unrest at Siemens Gamesa facilities, including strikes over working conditions.
In conclusion, the clean energy sector faces critical ESG challenges that threaten its potential for sustainable growth. Companies like Tesla, Siemens Energy, and NextEra Energy must prioritize transparency, improve governance, and address environmental and social issues to regain stakeholder trust. By proactively tackling these concerns, the sector can strengthen its credibility and better contribute to global sustainability efforts. The path forward is challenging, but addressing these challenges is essential for the clean energy industry's success in combating climate change.
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TextReveal’s web data analysis of over five million public and private companies is essential for keeping tabs on ESG investment risks. To learn more about how you can analyze web data or to request a demo, reach out to one of our representatives.
With 2023 drawing to an end, we wanted to share the most relevant ESG controversies during the year. In this article, we provide a comprehensive overview of the year's top ESG controversies, breaking them down into the three pillars of ESG: Environmental, Social, and Governance. Through our research, we will explore each of these areas in detail, shedding light on the most talked-about controversies and the companies involved.
Methodology
To gain a comprehensive understanding of the ESG risks in 2023, we conducted a thorough analysis of web mentions related to SESAMm’s ESG taxonomy across our expansive data lake with 20B+ articles. This allowed us to evaluate the overall volume of mentions related to each risk category: Environmental (E), Social (S), and Governance (G).
ESG Risks Over Time
Before diving into the details, we looked into the main trends over the last few years in ESG trends. We found a detectable increase in the volume of ESG-related web mentions, with an emphasis on social risks. Especially since the start of 2020, social risks have been on a consistent upward trajectory. Notably, there was a significant spike in mentions around mid-2020 following mass protests amid the COVID-19 lockdown, in addition to reports of cyberattacks and allegations of sexual assault. Furthermore, 2021 saw an uptick in mentions related to issues of racism (Black Lives Matter movement) and homophobia.
Figure 1: ESG risks over time.
ESG Risks: Focus 2023
We outlined the prominent risks in 2023: social risks, with layoffs and strikes gaining attention; environmental risks, marked by wildfires and oil spills; and governance risks, where tax evasion and ethical violations like bribery were in focus. Each risk category underscores the urgent issues facing society and the need for accountability and action.
Figure 2: ESG risks in 2023.
Environmental Controversies of 2023
Environmental risks may not match the sheer number of mentions that social risks receive, but their presence in discussions has steadily grown over the year, particularly in the third quarter. Let's explore the most common controversies that have emerged.
Climate Change and Policy
Climate change dominated environmental discussions in 2023. A noticeable peak in mentions arose in the latter half of the year, particularly around heatwaves and debates surrounding climate policies.
Atmospheric Emissions
September saw increased discussions about atmospheric emissions, notably due to the emissions from volcanic eruptions, hybrid cars, and the discovery of toxic metals in food products.
Impact on Biodiversity
The wildfires that spread in June sparked significant debates around their impact on biodiversity, leading to increased mentions and concerns related to environmental preservation.
Figure 3: Top environmental sub-risks in 2023.
Top 5 Environmental Controversies
These controversies are ranked by relative volume*.
Marathon Petroleum
Volume of mentions: 62
Relative volume: 69%
A significant portion of environmental risk discussions surrounding Marathon Petroleum was due to its chemical leak in Garyville. This incident led to massive fires, so large they could be observed from space. (source)
Nestlé
Volume of mentions: 30
Relative volume: 54%
Nestlé faced scrutiny in 2023, with over half of its environmental risk mentions associated with drought controversies. The company was urged to cease its water mining activities following severe droughts in France. (source)
Coca-Cola
Volume of mentions: 178
Relative volume: 53%
Coca-Cola garnered attention due to a hydrochloric acid leak in January 2023, leading to significant environmental concerns. (source)
ExxonMobil
Volume of mentions: 571
Relative volume: 31%
Exxon, along with Guyana’s environmental agency, was implicated in breaches of oil spill insurance policies. (source)
Shell
Volume of mentions: 872
Relative volume: 23%
An oil spill from a Shell pipeline adversely affected farms and a river in a region of Nigeria already grappling with pollution. (source)
Social Controversies of 2023
Social risks have taken the forefront in 2023, with notable web mentions increasing significantly. Here are the most relevant controversial topics:
Social Dialogue
Social discourse intensified at the start of the year, with news of widespread strikes in various sectors, including aviation and education, primarily driven by pay disputes. The wave of layoffs in several tech companies was the talk of the town, especially during the first quarter of the year.
Discrimination against minority groups, including the LGBTQ community and people of color, and age-based discrimination became a significant topic of discussion in 2023.
Figure 4: Top social sub-risks in 2023.
Top 5 Social Controversies
These controversies are ranked by relative volume*.
McDonald's
Volume of mentions: 8,903
Relative volume: 87%
McDonald's faced substantial social risks in 2023 due to significant layoffs of its corporate staff in April. The move led to public concern and discussions around the company's employment practices and stability. (source)
Google
Volume of mentions: 13,504
Relative volume: 43%
Google found itself in the spotlight as it faced challenges related to major layoffs in January and October of 2023. These layoffs contributed to almost half of the social risk mentions associated with the tech giant. (source)
Meta
Volume of mentions: 10,965
Relative volume: 38%
Meta, formerly known as Facebook, also faced scrutiny as 38% of the company's social risk mentions revolved around layoffs that took place in March and October 2023. (source)
Microsoft
Volume of mentions: 6,060
Relative volume: 28%
Microsoft faced challenges due to disruptions caused by cyberattacks in early June. In addition, the company had to navigate through controversies related to layoffs, contributing to its social risks. (source)
X (formerly Twitter)
Volume of mentions: 7,246
Relative volume: 8%
X/Twitter experienced a global outage, which was followed by significant layoffs. These events led to considerable public discussions and social risks for the company. (source)
Governance Controversies of 2023
Governance risks, though often overlooked, play a pivotal role in shaping corporate responsibility and ethical conduct. In 2023, several governance controversy trends emerged:
Money Laundering
Tax evasion was a major topic of discussion in the first quarter, highlighting the need for greater transparency and accountability within corporations.
Bribery
There was a significant increase in mentions related to bribery cases, underscoring the challenges in maintaining ethical governance standards.
These controversies are ranked by relative volume*.
FTX
Volume of mentions: 8,085
Relative volume: 40%
FTX, a notable entity in the financial sector, found itself at the center of governance controversies. A significant portion of the discussions surrounding FTX's governance risks in 2023 pertained to allegations of its founder's involvement in bribery schemes. (source)
Apple
Volume of mentions: 3,162
Relative volume: 28%
Apple, a tech giant, faced scrutiny as a third of its governance risk mentions revolved around antitrust violations reported in October 2023. (source)
Microsoft
Volume of mentions: 4,429
Relative volume: 25%
Microsoft encountered legal challenges with its deal with Activision. The company had to approach the court to reject the FTC's request to halt the deal. (source)
X (formerly Twitter)
Volume of mentions: 2,251
Relative volume: 18%
X/Twitter, another major player in the tech industry, faced legal challenges when a judge dismissed a shareholder lawsuit against Elon Musk concerning a Twitter buyout. (source)
Google
Volume of mentions: 3,920
Relative volume: 13%
Google faced judicial sanctions for allegedly destroying evidence in an antitrust case, further emphasizing the critical governance challenges even major tech giants face. (source)
Conclusion
In conclusion, the year 2023 proved to be eventful in the ESG landscape. From environmental concerns sparked by significant events like chemical leaks and wildfires to social challenges such as widespread layoffs and discrimination and governance risks underscored by bribery and antitrust violations, the year offered a comprehensive view of the myriad challenges companies face in the modern era.
Understanding these controversies and the companies involved provides invaluable insights for stakeholders, especially in the private equity and asset management sectors. AI-driven ESG insights, like those provided by SESAMm, can be pivotal in navigating the ever-evolving ESG landscape, ensuring informed decision-making and proactive risk management.
Relative volume*: Relative to the total volume of E, S, or G risks for the company during the same period.
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