As the world strives for a cooler planet, ESG investing is becoming a hot topic in the financial sector. This is because of rapidly growing demand from investors for products that consider Environmental, Social and Governance (ESG) criteria.
But there are political considerations too. The EU, for instance, believes the ESG market will help finance the green transition. As a result, the trade bloc is looking to regulate ESG products to put a stop to ‘greenwashing’ and build investor confidence in ESG products.
The EU’s ESG disclosure regulations are due to be implemented in March 2021, and will require asset managers to provide detailed sustainability information about their ESG investments. As reported in the FT, The European Fund and Asset Management Association (Efama) believe that this deadline is too demanding, and the organization has written to regulators asking for a delay. Its concern is that firms will be unable to source all the data required by the time March 2021 rolls around.
Terri Morgan, SVP and Sales Manager at RIMES, provides her thoughts: “It’s been clear for some time now that sustainable investing needs to be about much more than marketing, or simply ticking a few ‘green’ boxes. Rather, firms must embrace an agile approach to their strategy and operating models if they are to remain competitive to their peers and comply with emerging regulations.
“Some firms may feel that they’re not yet ready to report to investors in the detail required by the EU’s proposed disclosure requirements. But I would argue that delay to the regulation isn’t the answer. Your investors don’t want to wait for sustainable products they can trust in, and if your competitors can provide the level of detail investors want, they will simply take their business there.
“A better approach is to use the March deadline as a stretch target to get your ESG data integration capabilities up to speed. This needn’t be onerous. Admittedly, traditional data integration is a drain on legacy technology and resource heavy. But there’s another way. By partnering with a managed service provider like RIMES, you can instantly plug into the data sources you need via cloud-based consumption models.
“RIMES’ ESG ratings service draws on the broadest of data coverage from ESG rating providers and our expertise in data management to provide firms with a fast and accurate way to increase transparency around their investments. What’s more, RIMES is able to help firms bridge the data skills gap and lower the cost of ownership of ESG data on-boarding and integration.”
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