The “O” in SPO: How opinionated are the second party opinion providers?

September 18 2020

Dr Arthur KrebbersHead of Sustainable Finance, Corporates

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Second Party Opinions (SPOs) form a core pillar of the sustainable finance market. They deliver an independent, external review that is valued by investors and other stakeholders alike (see: link). Yet the source of their value is often debated. “SPOs are not really that opinionated” is the view we sometimes hear in the market. We decided to put this to the test: How important is the “O” factor?

Our initial data crawling exercise consisted of 59 opinion documents, containing around 390k sentences. We’ve looked into both, the most frequently used terms (“n”) as well as the most distinct terms (Term Frequency – Inverse Document Frequency “tf-idf”1).

Normative adjectives such as “strong”, “positive”, “effective”, “impactful”, “significant” – or indeed their opposite – should arguably qualify as opinionated language. These were nowhere to be found in the top-25 terms (“n”), which mainly consisted of standard, objective sustainability “lingo” such as “green bond”, “eligible projects” or “bond framework”. Words that were closest to suggesting the report contained a specific judgement included “environmental benefits”, “social risks” and “controversial activities”.

Of course, this could be due to a difference in SPO provider language. This is still a nascent and fragmented market, meaning each organisation could use different words to express their opinion. Here the tf-idf measure can help: it gives a sense of distinctive words that are important to individual reports. However, similar to “n”, this ranking, as shown in chart 2, also lacks obvious normative adjectives that clearly pertain to the framework. The closest are arguably words that relate to the overall company’s ESG score (such as “corporate rating” or “decile rank”), which some providers include in their assessment.

So, what could explain the relative absence of normative language in a SPO report? Arguably, the aim is to have a “clean opinion” – rather like an auditor statement. SPOs are often iterative processes, and areas of considerable weaknesses can be discussed ahead of completion of the framework. Moreover, the scope of many SPOs includes verification aspects (“Did the issuer indeed follow the processes set out in its framework?”) as well as certification workstreams (“Is the issuer aligned with ICMA2 or other standards?”).

In summary, the value lies not only in the end product. Like with many ESG3 ambitions, it’s the journey that matters.

Chart 1: Most frequently used words: # of mentions

Chart 2: Most impactful words used: tf-idf ratio

Thank you to Dario Berruti and Niceasia Mc Perry for their research assistance



tf-idf (Term Frequency – Inverse Document Frequency)
Methodology: measures how important a word is in the context of an SPO. The tf–idf value increases proportionally to the number of times a word appears in the document and is offset by a function of the number of documents in the corpus that contain the word. The latter is meant to mitigate the effect of certain words being more common generally



International Capital Market Association



Environmental, social & governance

Green bonds

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