Connect with us
Finance Digest is a leading online platform for finance and business news, providing insights on banking, finance, technology, investing,trading, insurance, fintech, and more. The platform covers a diverse range of topics, including banking, insurance, investment, wealth management, fintech, and regulatory issues. The website publishes news, press releases, opinion and advertorials on various financial organizations, products and services which are commissioned from various Companies, Organizations, PR agencies, Bloggers etc. These commissioned articles are commercial in nature. This is not to be considered as financial advice and should be considered only for information purposes. It does not reflect the views or opinion of our website and is not to be considered an endorsement or a recommendation. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third-party websites, affiliate sales networks, and to our advertising partners websites. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish advertised or sponsored articles or links, you may consider all articles or links hosted on our site as a commercial article placement. We will not be responsible for any loss you may suffer as a result of any omission or inaccuracy on the website.

INVESTING

Unstoppable ESG momentum puts investment manager reporting in the spotlight

Published On :

By Jacolene Otto, Head of Private Equity and Real Estate, Maitland

  • Dedicated sustainable investing assets are forecast to reach $13 trillion globally by 2025, more than quadruple the $2.8 trillion total at year-end 2020, according to new research from asset management consultant Casey Quirk.
  • The Global Sustainable Investment Alliance (GSIA) says sustainable investment in major financial markets has grown 15% over the past two years and now tops $35 trillion.
  • The Net Zero Asset Managers initiative indicates almost half of the total funds managed globally($43tn) are now committed to a net zero emissions target.

The figures tell a dual story. First, of impressive growth. Investor demand, emerging regulatory disclosure requirements, and the launch and reclassification of environmental, social and governance (ESG) funds have fuelled a surge in ESG-focused asset allocations – a trend that shows no sign of slowing down.

Second is the multitude of ESG-related definitions and designations that have sprouted up over time, and the wildly varying statistics about the industry’s size and growth that result.

Given the industry’s current lack of ESG reporting standardisation, it is no wonder so many investment firms are struggling to report the true value of their ESG-focused investments. For their part, investors must navigate a melange of metrics, rating systems and scorecards to determine the ESG value of a particular fund or investment.

To demonstrate best practice and stay ahead of regulator and investor demands, investment managers must move beyond ESG reporting as a tick-box exercise, and instead ensure it is aligned with their core investment strategy and business objectives.

To achieve more effective ESG reporting, fund managers will need to take these five key steps:

  1. Understand key drivers

Understanding and responding to current market drivers will enable firms to create an ESG reporting strategy that meets the needs of existing and future clients. The Covid-19 crisis has been a particular inflexion point, with investors increasingly considering ESG factors in an attempt to address the issues exposed by the pandemic. As a result, we can expect to see the social component of ESG move to the forefront.

Climate concerns remain top-of-mind for many too. The release earlier this year of Netflix’s ‘SeaSpiracy’ docufilm, a raft of new country and corporate net zero commitments, plus COP26 in November – when world leaders will gather in Glasgow to build on the landmark 2015 Paris meeting – suggest 2021 could be a turning point in the fight to tackle climate change.

Gen-Z will also be a progressively important presence in the business world and as wealth accumulators. They will bring with them a different and more ESG focused set of values as both working professionals and future investors.

  1. Be realistic

When identifying which metrics to report on, firms should start small and outline realistic, achievable goals. Over time, as capabilities and experience improve, they can expand their objectives.

Funds often have multiple stakeholders, each with different preferences. The trick is to identify metrics that are actually reportable and make sense for all parties involved. Avoid trying to do too much too soon. Reporting on the impact of every area of a fund won’t work, so pick a couple of ESG metrics you can report on effectively, for example by using data inputs from underlying investment companies.

  1. Think about the story you want to tell, and tell it well

With new technologies, approaches and players entering the market all the time, ESG-conscious investors will ultimately be swayed by the story behind the numbers, and how well that story is told. Demonstrating the impact of ESG investments, and doing it in an engaging way, will be key to winning over this growing investor cohort.

Striking the right balance between qualitative information and quantitative metrics is essential. From mission statements to video content, the onus is on making the end-investor feel more connected to the impact their investments are having on the ground.

  1. Don’t neglect the ‘G’ in ESG

The ‘E’ and ‘S’ have garnered the lion’s share of attention in recent years, eclipsing the importance of the ‘G’ element. Yet without the correct processes, legislation and reporting in place to underpin environmental and social progress, firms will struggle to grow at the pace of demand.

In a post-pandemic environment, effective governance will enable us to rebuild our economies and societies on stronger foundations. And it will help the investment industry become more robust and sustainable.

  1. Align ESG reporting with your investment strategy

Generating real impact as a company stakeholder doesn’t happen overnight. In some cases, it could take up to five or ten years. Which is why tying ESG reporting into firms’ overarching investment strategy will be critical for long-term success.

Authenticity is crucial here. Investment firms should base their ESG reporting strategy on what they are trying to achieve as a business, not what their competitors are doing. More than that, it has to be genuine – something the firm does because it wants to, not because of some legal obligation.

ESG-oriented investing is the way of the future. Getting ESG reporting right will be vital in helping firms compete successfully in this changing environment.

Continue Reading

Why pay for news and opinions when you can get them for free?

       Subscribe for free now!


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Recent Posts