Hi Joachim - this is not to disagree with your thesis, but as a former sell-side analyst of 20 years in the business, it is also true that the sell-side can and do generally write about hot topics for the buy-side, and if the sell-side don’t write much about ESG in the absence of some blow-up at a stock, one reason could be that the buy-side just isn’t asking that much for any reason - maybe they prefer to do their own homework, or they rely on third-party ESG scores. The other consideration is that Governance issues can be highly sensitive for IR and management, and could result in loss of roadshows or loss of direct calls or de-prioritisation of callbacks for a sell-side analyst who writes something that offends IR or management. Some things are easier discussed orally only with the buy-side!
My experience is somewhat different. While you have a point (I have previously written about how the buy side’s interest in ESG is mainly driven by the interest of their customers, less a genuine belief in the issue), I think there is something else at play as well.
If I consider how the big sell-side firms are covering ESG, it is generally in the form of specialised ESG research that is integrated into company research. Note that the study I quote only covers company research, not strategy research. And most ESG research in the sell side still originates from a more thematic approach.
Hi Joachim - this is not to disagree with your thesis, but as a former sell-side analyst of 20 years in the business, it is also true that the sell-side can and do generally write about hot topics for the buy-side, and if the sell-side don’t write much about ESG in the absence of some blow-up at a stock, one reason could be that the buy-side just isn’t asking that much for any reason - maybe they prefer to do their own homework, or they rely on third-party ESG scores. The other consideration is that Governance issues can be highly sensitive for IR and management, and could result in loss of roadshows or loss of direct calls or de-prioritisation of callbacks for a sell-side analyst who writes something that offends IR or management. Some things are easier discussed orally only with the buy-side!
My experience is somewhat different. While you have a point (I have previously written about how the buy side’s interest in ESG is mainly driven by the interest of their customers, less a genuine belief in the issue), I think there is something else at play as well.
If I consider how the big sell-side firms are covering ESG, it is generally in the form of specialised ESG research that is integrated into company research. Note that the study I quote only covers company research, not strategy research. And most ESG research in the sell side still originates from a more thematic approach.