Month: May 2023

For asset managers, tracking sustainability performance in portfolio companies is complex. manage+ simplifies the process.

Asset managers are increasingly under pressure from investors, regulators and other stakeholders to disclose information about the environmental, social and governance (ESG) performance in their portfolios. In response, many managers need to shape up their processes for tracking and organizing ESG performance in their portfolio companies.

But this requires aligning with a complex mesh of sustainability frameworks and standards. So many asset managers are desperately seeking something that helps them more easily track and manage sustainability reporting. But they can relax – a one-click ESG reporting solution is at hand, and it’s called manage+.

4 ways to improve ESG data management and reporting

manage+ helps asset and fund managers reduce the time, cost and resources they spend on ESG data management and reporting across their portfolios. manage+ provides a bird’s eye view of your portfolio sustainability performance, helping you track it seamlessly from one dashboard; boost communication with your portfolio companies; and generate your portfolio’s aggregated metrics in one click.

Here is more detail about the four key ways manage+ helps asset managers.

1. Comply with global sustainability standards and frameworks

manage+ enables you align with frameworks relevant to your company, such as Task Force on Climate-related Financial Disclosures (TCFD); Sustainable Finance Disclosure Regulation (SFDR); Institutional Limited Partners Association (ILPA); Global Reporting Initiative (GRI); Sustainable Accounting Standards Board (SASB); and ESG Data Convergence Initiative (EDCI).

Asset managers invite their portfolio companies to input their details and create a myCSO account, including information about their industry and sub-industry. myCSO then automatically generates assessments tailored to material topics for each company.

This aligns companies with the relevant international standards and frameworks to make compliance and reporting hassle-free for them and the asset manager.

2. Auto-populate your ESG data to any LP or regulatory template

manage+ integrates a natural language processing (NLP)-driven tool that enables precise auto-population of the asset manager’s ESG data into any LP or regulatory template. 

This eases reporting; significantly streamlines data collection and reporting processes; and saves time and effort for your fund managers and regulatory compliance teams.

3. Easily manage and analyze your portfolio’s ESG performance in one place

Get a holistic overview of your portfolio’s ESG and sustainability performance across industries on one portfolio dashboard. This includes an overall ESG score that also breaks down to show how well each company performed on various ESG topics and indicators.

Once companies have submitted their assessments, myCSO will auto-generate a performance dashboard and reports analyzing their ESG performance.

This analysis helps you identify and target areas of weakness to work on and improve sustainable impact and value across your portfolio.

4. Benchmark and compare ESG performance and track KPIs

The dashboard shows how well each company performed on common indicators against its peers of the same or similar industry, region and size.

This enables asset managers to analyze and benchmark performance, track key performance indicators and extract insightful data that benefit you and your portfolio.

Want to learn more about manage+?

Book a demo and start managing your portfolio companies’ ESG with ease today.

Asset managers have an opportunity to strengthen their ESG propositions to improve performance, risk management, sustainability, and recruitment.

Asset managers have a major opportunity to better align their sustainable investment practices, products and reporting with investor expectations globally. That’s the verdict of two recent reports from credible sources.

The first is a 2023 Deloitte survey, which concluded that, in a highly competitive market, ESG investing offers asset managers a significant opportunity for organic growth. But they have to meet investors’ needs for transparency and well-defined causes.

The second is the latest Sustainable Signals survey from the Morgan Stanley Institute for Sustainable Investing. This highlighted several areas where asset managers have an opportunity to meet growing sustainable investing interest and demand from asset owners; and better differentiate in a maturing market.

Our experience at Rimm is that there are significant gaps in ESG data at many companies, which impede their ability to provide the transparency investors need. There is an increasing focus for asset managers to manage their portfolios and drive disclosures in alignment with Institutional Limited Partners Association (ILPA) principles, Task Force on Climate-Related Financial Disclosures (TCFD), the Sustainable Finance Disclosure Regulation (SFDR) and other reporting standards and frameworks.

If asset managers can bridge these gaps, they could boost growth opportunities significantly. Conversely, those who fail to meet these challenges risk losing valuable clients, and underperforming in the long run.

Let’s explore in more detail how and why asset managers need to strengthen their ESG propositions.

ESG improves long-term returns

The vast majority of asset managers believe ESG strategies will improve returns. And many say using ESG strategies has already yielded higher performance. We also know that the majority of investors say they would pay higher fees for this performance premium.

There is an increasing body of independent evidence to support these claims of outperformance.

For example, a 2023 study from MSCI showed that the ESG factor consistently posted positive or neutral performance across sectors and this effect gets clearer over longer periods.

Other studies have shown ESG-prioritized companies have higher returns, especially over longer periods, thanks to factors such as improved risk management and greater innovation. Some suggest that companies with strong ESG profiles are less vulnerable to disruption from regulatory or market changes, thus lowering costs of capital and buoying share prices.

By the way, some asset managers are currently finding investment returns hard to come by in the economic downturn. But with many companies driving new innovations in ESG, as highlighted in 2023 research by the World Business Council for Sustainable Development, these dynamic firms could prove a valuable hunting ground for outperformance.

Demand keeps growing

Despite uncertain economics, demand for ESG and impact investing continues to grow. PwC predicts that between 2021 and 2026, global ESG investment will more than double to $33 trillion – much faster than the wider asset and wealth management market.

At Rimm, we know investors are increasing their attention on ESG areas such as data security and privacy, corporate governance and reducing greenhouse gas emissions.

Most asset managers already implement or plan to implement sustainable investing in response. But, in this competitive market, any asset managers with weaker ESG options risk losing clients to stronger competitors, and missing growth opportunities.

It’s a future-proofer

Integrating ESG factors can help asset managers manage long-term risks and ensure sustainability. A strong ESG proposition helps you identify firms that can benefit from long-term ESG trends. But it also enables you to screen out companies whose long-term performance may be damaged by ESG risks, thus future-proofing your portfolios.

Alternatively, if you engage actively with such companies, you can also encourage them to follow more ESG-related practices. This helps further reduce risk and support long-term performance.

Win the talent war

Sustainability and social responsibility are increasingly important for younger employees, and they are more likely to choose employers that reflect their values.

From talking to clients, we know a strong ESG proposition can help asset managers get ahead in the talent war by attracting and retaining valuable staff. With talent shortages reaching critical levels in 2023, this is more important than ever. Conversely, a weak ESG strategy can create a social stigma and cause companies to lose key workers or face a restricted talent pool.

In conclusion, asset managers need to focus on strengthening their ESG proposition for multiple reasons, including the impact on investment returns; growing demand for sustainable investing; better risk management; ensuring long-term sustainability; and attracting and retaining talent. This shows why developing a strong ESG proposition is not just right, but smart – a great business decision that can benefit asset managers and their clients long-term.

manage+ can help you bridge data gaps and manage your portfolio companies’ ESG performance in alignment with major global standards, including ILPA, TCFD, SFDR and more. Book a demo to learn more today.

With the ever evolving ESG reporting and regulatory scene, it can be difficult to keep up with key developments. Let’s look at 5 up and coming standards that will impact your business.

Sustainability reporting is becoming an integral part of business operations. For many companies, this trend goes beyond brand positioning and making a positive impact, affecting their regulatory compliance, financial statements, and funding from investors. With more complex and comprehensive sustainability disclosure requirements being introduced, navigating the sustainability reporting scene can be daunting, but remains key.

Here’s an overview of some of the important new standards and frameworks to keep on your radar in 2023.

1. Sustainable Finance Disclosure Regulation (SFDR)

The SFDR was proposed by the European Commission in 2019 and aims to promote sustainable finance and minimize greenwashing in the EU. The regulation requires financial market participants (FMPs) and financial advisers (FAs) to provide greater transparency around the sustainability of their investments and is divided into three levels of disclosure requirements: (Level 1) mandatory disclosure of sustainability policies by FMPs and FAs, (Level 2) detailed information on the environmental, social, and governance (ESG) characteristics of investments and how these are incorporated into the investment decision-making process, and (Level 3) mandatory disclosure of the impact of investments on sustainability.

2. Corporate Sustainability Reporting Directive (CSRD)

The European Commission has developed the CSRD framework to strengthen and standardize sustainability reporting for businesses operating in the EU. With its goal of offering stakeholders a thorough and consistent system of sustainability reporting to make decisions that will promote sustainable growth, the CSRD expands reporting requirements to all major corporations and companies listed on EU regulated markets, replacing the current Non-Financial Reporting Directive (NFRD). This initiative is estimated to affect over 50,000 European companies and over 10,000 foreign companies, which would bolster a new degree of confidence for sustainability reporting.

3. Corporate Sustainability Due Diligence Directive (CSDDD)

Proposed by the European Commission in February 2022, the CSDDD aims to hold businesses accountable for their impacts on the environment and society. With the overarching aim to make Europe climate neutral by 2050, the directive is currently in the feedback stage and is projected to impact approximately 13,000 EU and 4,000 non-EU companies once implemented in 2024. In order to comply with CSDDD, organizations must detect, prevent, mitigate, and account for any potential negative effects of their activities and supply chains on the environment, human rights and social issues. This has a ripple effect on SMEs that are involved in the supply chains of many of the affected larger companies as they may need to disclose information and minimize their own risks.

4. Sustainable Disclosure Regulation (SDR)

The UK Financial Conduct Authority (FCA) has also come up with their own measures targeting investment firms and distributors of in-scope investment products to combat greenwashing in the investment scene. The SDR incorporates the TCFD recommendations and double materiality. Some of the requirements of the SDR include three sustainable investment labels for retail investors to navigate the complex sustainable investment scene and more in-depth sustainability disclosures at the product (consumer, more general) and entity (stakeholders, more granular) level. While this measure is still in the early stages of implementation, it will have a significant impact; the FCA estimates that the SDR will affect about 450 funds managing £10.6 trillion in assets.

5. Climate-Related Disclosure Rule

In the US, the Securities and Exchange Commission (SEC) has proposed a new rule in 2022 requiring registered domestic and foreign companies to disclose information on climate-related metrics by February 2024. Under the new regulations, companies will be required to provide information on the physical and transition climate risks and impacts, governance practices around risks and risk management, mitigation plans, Scope 1 and 2 emissions, Scope 3 emission if material or a target has been set, and climate-related financial metrics in a note to audited financial statements. Building on the TCFD framework, these regulations aim to help businesses disclose climate risks and opportunities and standardize information for investors.

With the increasingly stringent and comprehensive regulations set to take place, organizations need to keep up with mandatory requirements under the new frameworks and standards for sustainability reporting and disclosure to be ready for compliance. Awareness, followed by appropriate planning, is key to mitigating the potential negative effects on your business and society.

Want to know what to include in your sustainability report?

Read our previous post on ‘What to Include in Your Sustainability Report’