“Not everything that counts can be counted and not everything that can be counted counts”

The above is a common view across the investment industry when evaluating important ESG metrics missing from the balance sheet. Indeed, many industry experts recognize the impact that social principles in particular (the ‘S’ factor in ESG), has to corporate performance. This factor is commonly associated with labour management issues such as employee engagement, company culture and career development opportunities. Such metrics, however, are often regarded as intangible and difficult to quantify.

Sports Direct and Ryanair have both demonstrated share price volatility in that many attribute to poor labour management practices. Finding a way to measure social intangibles, and in particular monitoring significant changes to such, could therefore be a useful leading indicator in predicting share price movements.

A closer look at social factors

At Neudata, it has become increasingly apparent to us that the proliferation of Big Data has facilitated new ways to measure the social dimensions of businesses activities. An increasing number of data providers are making attempts to quantify the qualitative and provide new insights into equities markets.

Crowdsourced company reviews, web-scraped employee information and real-time workforce surveys are just a few examples of under-utilised alternative data sources. Aggregating crowdsourced company reviews on a 5-point scale, just as Glassdoor provides, is one way of quantifying employee engagement levels. More granular employee engagement metrics, such as career opportunities, compensation & benefits, work/life balance, CEOs & senior management and culture & values, are also available in a quantitative format. Datasets similar to those offered by Glassdoor but less known include the following alternative data providers: