MSCI ESG Research has initiated coverage of Facebook with an MSCI ESG IVA rating of 'B'.
The company's privacy practices present the single biggest risk to its business from an ESG perspective, and we have serious concerns about Facebook's vulnerability on this issue in the medium to long term. As with other Internet services companies in the Software & IT Services industry, we also evaluated the company's approach to data center energy management, civil liberties, human capital development, and clean technology opportunities.
Highlights of our Facebook company findings include:
- Adept handling of user privacy is key to Facebook's long term success, but the company's history of missteps and frequent changes to policies and user privacy management tools make it exceptionally vulnerable to lawsuits and regulatory action.
- China represents a huge potential new market but one that is rife with risk to its growth prospects if the company fails to address censorship and civil liberties concerns.
- Facebook is taking a smart approach to energy consumption, aggressively seeking to maximize data center efficiency and incorporate renewable energy availability into its data center siting policy.
- Facebook lags key competitor Google (MSCI ESG IVA rating: 'A') in addressing all key ESG risks for the industry. Although Google has dealt with extensive privacy blunders in certain products, its policies and tools are clearer, simpler, and offer more extensive protections. Facebook's energy and civil liberties strategies are also less comprehensive than Google's at this point, though we anticipate that with its high profile Facebook is likely to soon face the same external pressures on these issues that Google has seen.