How language can help measure ESG

This article originally ran on our sister site, Benefits Canada.

Identifying language more commonly used by a certain gender could have bearing on data analysis of socially responsible investment choices.

A new metric, formulated by alternative data firm Indexia, measures the relative male- or female-dominated nature of language used by a company. The metric was built through a process of analyzing millions of direct quotations from both men and women, and then attributing a male- or female-leaning designation based on how many times a word was used by each gender.

Female-dominant language tends to be softer and more caring or conscientious, whereas male-dominant language can include patterns described as “macho,” noted a press release.

In using the metric to analyze discourse around public companies, Indexica found that across significant samples of text, female-dominant language tends to be used in conjunction with events and behaviours that correlate with higher environmental, social and governance rankings, while the opposite is true of male-dominant language.

“It’s still the wild west when it comes to ESG metrics and investing,” said Zak Selbert, chief executive officer at Indexica, in the release. “The subjective categories considered important and the inconsistent human analysis that goes into scoring are problematic and ever-evolving. Animal agriculture, for example, is barely a part of most ESG scores, yet is one of the most important factors impacting our environment, health and principles. Over time, ESG models will have to move towards measuring this.”