Sylvain Forté, CEO and co-founder of SESAMm, presented the following at Finovate 2022. In the presentation, Sylvain explains who SESAMm is, what SESAMm does, including examples, and how it benefits our financial clients.

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Hi, everyone. Thank you very much for the opportunity to be with you today. I’m very glad to introduce you to SESAMm. I’m Sylvain, CEO and co-founder of SESAMm.

We’re an artificial intelligence company specializing in analytics for investment professionals and [corporations]. We basically extract billions of articles and messages from the web and transform them into actionable insights to make better decisions. We’re a team of close to 100 people now, and we generate insights from more than 20 billion articles and messages.

Immediate access to daily insights

Let me jump straight to the demo and give you a practical example of what we do. So imagine you’re, for example, a bank looking to compute environmental, social, and governance risks on your portfolio on your clients or on your suppliers. Right now, you may have access to ratings, which are updated once per quarter or once per year. We can give you access immediately to timely daily data on all of your companies in order for you to better assess risks and raise early warnings.

Wirecard use case

In this specific example (Figure 1), we look at Wirecard, a company that went bankrupt due to a 2 billion fraud scandal in Germany.

We extracted dozens of thousands of articles and messages on the company, and we can immediately see that there is a huge anomaly in terms of governance risk. The company is basically exposed to fraud accusations, to lawsuits, and the like, things that you don’t really want to see in your clients or your own portfolio.

Furthermore, we can see on this chart that we can get that type of indicator every single day. And we can see that six months prior to the company’s bankruptcy, there were already huge alerts actually here in January 2020, indicating that the company was in a pretty bad situation from the perspective of web content and web data from news to social platforms, blogs, and forums.

We really have the ability to compute live insights for ESG risk, sustainability monitoring, credit, and similar topics. The advantage of the platform is that we can go very deep. You can see here (Figure 2) some of the underlying governance topics associated with Wirecard, such as fraud, embezzlement, and crime—the main accusation—but also things related to anti-competitive practices or corruption.

And furthermore, the platform enables full transparency. This is AI at scale, but the underlying content is actually text articles and messages that you can read in order to understand the situation and see why the company is in that risk position. So with our platform, with our text analysis engine (TextReveal®), you can immediately extract content on your portfolio, your clients, your suppliers, and for example, generate ESG insights, competitive insights, sentiment insights, or credit warnings, for example.

Trusted, reliable, and abundant insights

We are today trusted by major financial institutions, such as Nomura [Holdings] or Raiffeisen Bank in the banking sector, for example, or large private equity firms worldwide. The reason why they trust us is that we can provide data more quickly—so waiting one day instead of waiting three months—to get an indicator. In addition to that, we have better coverage. We’re the only company in the world that can provide information on five million different public and private companies, meaning all of your banking clients, for example, are covered. And finally, we have access to a large variety of sources, from social content to news and blogs.

Insights beyond companies

Another example that is very common—sadly right now—is clients asking us to follow the Ukraine Russia War and to understand the current situation, including by getting access to local content in local languages in Ukrainian, in Polish, in Russian, to really understand the news and social media out there.

You can see here that beyond companies, we actually track sectors, infrastructure projects, and concepts.

Here (Figure 3), Nord Stream, for example, in the context of Ukraine specifically—so as to understand how these two topics are associated on the web—we can see an explosion in terms of volumes of data over time, the news associating this concept more and more, with more than 40,000 pieces of content. And we can see that sentiment over time, as displayed on this curve (Figure 4), decreases very rapidly, so we see the shock on e-reputation, and we can observe that immediately. And, for example, as a bank or as an asset manager, we can use that to assess the potential risk to clients or portfolio companies.

The interesting thing here is that, beyond the graphs and the raw contents, we can look at where the information comes from. Here (Figure 5), you see a lot of information in German, for example, which is not surprising. And you can even follow the Russian propaganda directly from the platform, looking at Russia Today or Sputnik straight from the engine, as these are also sources that we monitor.

And as you can see, these contents are highly customizable and can be used in very specific situations. So this is really a platform as a service (PaaS) that we offer. This is an engine that tracks four million different sources of information, and we can track millions of companies but also even fuzzy concepts, countries, or topics of interest.

Generate analytics from big data with API

One last thought. A lot of our clients integrate with our API; it’s a technical solution. We work a lot with data science teams, data engineering teams, risk teams, quantitative analysts, and heads of innovation. All of these teams are looking to generate analytics from big data and from web content at scale, with solutions that are currently used by dozens of clients worldwide and for which we provide very relevant analytics.

I’ll leave you with three final calls to action.

1. The first one is come see us at our booth. We would be very happy to present the solution in a bit more detail.
2. The second is, please request a demo. You understand that these indicators can be tailored to your needs in real time. So we’ll be very happy to show you a demo at SESAMm.com.
3. And finally, come see us for a free proof-of-concept (POC). We would be very happy to show you how we incorporate these solutions in actual banking tools and in risk management tools.

So the web is now readily available as a system that you can use and that you can rely on in order to generate valuable insights. We’re very happy to provide the solution to the market and to help inform better decisions and to help monitor risks.

Thank you very much.

May 2, 2022. The S&P 500 ousts Tesla, Inc. from the S&P 500 ESG Index. Tesla is widely recognized as the firm that ushered electric vehicle making into the mainstream. So the index’s move seems unreasonable or possibly made in error to many, raising some interesting questions:

• How does an environmentally-friendly corporation like Tesla get dropped from an ESG index?
• Why does a potentially non-environment-friendly company like Exxon make the ESG index and remain on it?
• What do these moves mean about the integrity and validity of ESG scores and ratings?

Before we go on, let’s bring some context.

Why did the S&P 500 ESG Index drop Tesla?

May 18, 2022. In an S&P blog post, "The (Re)Balancing Act of the S&P 500 ESG Index," a spokesperson announces and explains their decision. Here are the bullet points:

• Global industry group peers pushed Tesla’s S&P DJI ESG Score further down the ranks in the GICS industry group: Automobiles & Components.
• A decline in criteria level scores related to Tesla’s low carbon strategy and codes of business conduct contributed to its 2021 S&P DJI ESG Score.
• A media and stakeholder analysis identified "two separate events centered around claims of racial discrimination and poor working conditions at Tesla’s Fremont factory."
• The analysis also highlights "the handling of the NHTSA investigation after multiple deaths and injuries were linked to its autopilot vehicles, affecting the company’s S&P DJI ESG Score at the criteria level, and its overall score."

Companies, including Tesla, left out of the S&P 500 ESG Index post-rebalance. Image courtesy of Indexology Blog.

The S&P blog post summarizes their case about dropping Tesla, "While Tesla may be playing its part in taking fuel-powered cars off the road, it has fallen behind its peers when examined through a wider ESG lens." And in this statement lies the crux of why the index dropped Tesla and why others are still on.

Analyzing Tesla’s web data

SESAMm’s TextReveal® insights suggest that the S&P 500’s decision to remove Tesla could be justified based on increasing controversy levels concerning discrimination, ethical standards, and work health and safety. By analyzing text related to ESG topics across the web, we picked up trends for the following subtopics:

• climate_change_atmospheric_pollution
• ethical_standards
• discrimination_racism_sexism
• labor_standards
• health_and_safety_at_work
• general_environmental_impact

Tesla’s ESG scores (six subtopics)

Regarding the volume features (Figure 1), we observed a significant increase in the scores related to ethical standards, discrimination, and atmospheric pollution for Tesla before the controversy. The conclusions are mostly the same for ESG sentiment (negative) scores. An interesting note is that the negative score of health and safety at work slightly increased in the months before the removal of Tesla from the index.

Comparing Tesla’s sentiment with other S&P 500 ESG Index companies

To see how Tesla’s ESG sentiment scores compared with other companies, we must rescale them with respect to a large universe of companies. This process means that for a given company, we use percentiles of the distribution of each subtopic’s ESG score to do a rescaling to the S&P 500 ESG constituents list after the 2022 rebalancing. Rescaling allows us to compare the companies with each other because the rescaled score indicates how bad the company is compared to the others, according to a specific ESG subtopic.

The following graphs show different sets of subtopics, plotting the mean of the respective rescaled scores if several topics are considered. Here are the companies considered.

Companies removed from the index:

• Tesla
• Delta Air Lines
• Chevron Corporation

Companies that joined the index after the 2022 rebalancing:

• American International Group
• Expedia Group

Companies still part of the index:

• Exxon Mobil
• Apple
• Amazon

Tesla, Delta, Chevron, AIG, and Expedia compared

Apple, Amazon, and Exxon compared

The S&P 500’s choice is reasonable

Our analysis shows that the S&P 500’s decision to oust Tesla from the ESG index is reasonable. We found significant subtopic volumes and negative sentiment that support the S&P 500’s claims of racial discrimination, poor working conditions, and other controversies.

Thanks for reading this quick analysis. For a more detailed report, including Chevron’s and Delta’s ESG scores, reach out to a representative today.

SESAMm’s ready-to-use alternative data

Leverage our alternative data streams to incorporate systematic insights into your alpha signals or risk monitoring your entire portfolio. From tracking global sentiment to analyzing retail communities like WallStreetBets and integrating ESG alternative data into your systems, our solutions will make generating value from web insights easy.

In our newest research, "ESG Controversies: A Comparative Study of Public vs Private Sectors," our ESG and Research & Analytics teams present an exhaustive study on the nuances of ESG controversies across public and private sectors. We combined artificial intelligence with our extensive dataset of over 25 billion documents to extract ESG controversies in both sectors. This research highlights the increased visibility and scrutiny of public companies compared to the more discretion in private companies. A case study on IKEA uncovers challenges in product safety and human capital, underlining the importance of proactive sustainability practices. The study examines these sectors' alignment with major ESG frameworks, including the UN Global Compact and Sustainable Development Goals, offering invaluable insights for enhancing corporate ESG strategies.

‍Key takeaways:

• Public companies are under constant observation, leading to higher exposure to ESG risks such as pollution, labor disputes, and governance failures. This visibility is partly due to regulatory requirements for transparency, making every aspect of their operations subject to public and investor scrutiny.

• Private companies, while benefiting from less regulatory oversight, encounter substantial repercussions from ESG controversies. These can manifest as sudden shifts in investor confidence, challenges in securing financing, or damage to reputation, underscoring the critical need for comprehensive risk management approaches that encompass environmental, social, and governance factors.

• The case study on IKEA provides an in-depth look at specific issues like product recalls due to safety concerns and the complexities of managing a global workforce. It highlights IKEA's efforts to implement forward-thinking sustainability initiatives and human capital management practices as key components of its corporate strategy, demonstrating the tangible benefits of such measures in mitigating ESG risks.

ESG controversies and breaches of SDG goals vary notably between public and private sectors. Public companies frequently encounter more visible and consistent ESG risks, while private companies, although subject to less scrutiny, experience significant impacts when controversies occur.

Dive deeper into ESG controversies and uncover strategies for navigating these challenges effectively. Download "ESG Controversies: A Comparative Study of Public vs Private Sectors" and equip your organization with the insights needed to enhance your ESG practices for a sustainable future. Fill out the form below to access your copy and lead the way in corporate sustainability.

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