This November, RIMES hosted a client forum in The Hague. During the forum, a panel of experts from Ortec Finance, ACTIAM, TruValue Labs and Aegon discussed the ‘hot’ topic of ESG data. What follows is a summary of the main points raised during the discussion.
The debate kicked off with an overview of some of the drivers, and corresponding challenges, of ESG (environmental, social and governance) data. One of the main pressures stems from the increase in regulations incorporating ESG factors. Pension funds, for example, are now required to report on how they incorporate ESG elements into their mandates. This puts pressure on asset managers to be able to provide the data required to win mandates, which in turn puts pressure on data providers.
Another regulatory development calls for asset owners to provide insight into climate risk. It is thought that climate change will have a significant impact on the financial markets, and firms need to take a long-term view of risk in order to prepare adequately. Here, as in other instances, regulations are a useful catalyst to change. Moreover, when it comes to ESG regulatory pressure is combining with new demands from clients to drive real and rapid transformation.
The panel also reviewed some of the practical elements of ESG investing. The starting point will be to build an effective investment process, and a lot of big players are currently involved in finding a solution to this challenge. Part of this requirement involves assessing the materiality of ESG factors; something which involves transitioning from a single source of information to data from multiple providers. This is where RIMES can provide assistance; not only aggregating but managing, enriching and transforming ESG data so it can be used easily by firms in the investment process.
Finally, the panel addressed some of the future challenges around ESG. One element that requires some further work is the top down strategy analysis. Many of the questions in this area remain unanswered. For example, how firms can best build a portfolio based on climate data analysis, or how macro factors join up with micro factors. Another key challenge will be meeting the diverse needs of clients. As ESG interests come to the foreground, different clients will want different things from their investments, catering to as broad a base of clients as possible will be a significant undertaking.
Contact us for more information on RIMES’ ESG data services.
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