Calculating the Damage Caused by an Anti-ESG Law

Redefining the meaning of our project

As we asked the client for more data a couple of times, we came to notice that the client and their pension funds are not really in line. Our client is a union of a profession and our objective is to calculate the damage to their pension fund caused by the anti-ESG law. To calculate the damage, we needed detailed information on the portfolio of the fund now and in the past. We tried using the Bloomberg station and internet search but still lacked some information. That’s why we asked the client for information on the pension fund’s portfolio. The team initially thought the client could get us the information easily as it should not be very confidential. In fact, one of the interviewees, who is a retired pensioner, told us that she and her fellow pensioners are welcome to attend the pension fund’s board meeting where they can see or hear about the portfolio. So, overall, it is not really confidential. But they never gave us the information. We explained how important such information is to the research, but the client just answered they would ask the employees of the fund and ended up not giving us the information.

Through these contacts, we came to understand that, in this US state, probably because of the economic importance of oil and gas companies, the pension funds are not in the same stance as our client. Our client is advocating strongly for ESG publicly, but the fund does not seem to really care as much about ESG itself. Rather, so far as we know, they invest more in oil and gas companies than in ESG companies or funds. Their investments in ESG are a mere part of larger diversification. Strong political presence of oil and gas companies is probably discouraging the fund from investing more or more actively supporting ESG. Otherwise, the pension fund would have been able to submit the estimate already. Pension funds in other states where an anti-ESG law was passed have had estimates of the damages reported. This situation does not change the scope of our research but redefines the meaning of this research. We cannot probably have the perfect work based on all the necessary information, and thus we need to have an analysis that entices the cooperation of the pension fund. At the same time, we still need to provide an analysis accurate enough for the client to convince the legislation. The project has gotten even more complex. We should have noticed this so that we could have gone on with our analysis without waiting too much for the information.

Our analysis

Because of the situation stated in the previous section, we built our analysis mostly based on news coverage and information available on Bloomberg online. As someone new to financial analysis, it was a lot of work for me to figure out how to find the portfolio of the fund and how to measure and compare the performance of the fund or stock. The limited data confined our analysis, but we still managed to put together a solid analysis. We collected information on how much from what companies/funds the pension fund had to divest and compared the performance of these companies/funds with the average return of the pension fund in the previous year or the previous ten years. We also found information on possible further divestment and analyzed the damage expected.

However, our analysis is not perfect even as an estimation. For some of the investments in companies they divested from, we could only find the total amount of investments in those companies but not the details of how much the pension fund had originally invested in each company. We still conducted the analysis of the divestment and its damage by comparing the average performance of these companies with the overall performance of the pension fund, but it should be weighted properly for a more precise result. This analysis needs polishing. We will tell the client to show the work to employees of the pension fund so that they can fill out some information and polish the analysis. I am not sure if they will cooperate but I believe from my previous work experience that the best way to engage someone who is not in support of your objective is to show them some estimate or approximate calculations like we will for this project. Those who don’t support your view do not want the incorrect information that exaggerates the point of your view published, so they tend to cooperate, though unwillingly, in the end. I hope it works that way in this case.

Personal Learning

I learned a lot from this project. Our client has been nice and cooperative with us but they did not have all of the necessary information. Our research required financial analysis as well as insights into local political structures. All of our team members have been pretty busy with different commitments in and out of the university. All of these difficulties made me learn. In terms of substance, trying financial analysis was a big challenge and a precious learning opportunity for me. In terms of project management, we needed to know how to harmonize different working styles. The best way we could find was not to be too coercive in work allocation but find the minimum we should absolutely deliver. Once we have a mutual understanding of what is needed at least, everybody started to make use of their own expertise and developed the analysis in their own ways. It was hard but fun to see our different views synthesized in the end. I want to express my appreciation to my teammates and Professor Caroline for the wonderful learning opportunity. I am also grateful to the client for their engagement and warm support. It was such an honor for me to be able to help the client fight against the anti-ESG law!