It is no secret that there has been an increase in interest from investors in products that leverage Environmental, Social and Governance (ESG) criteria. These investors want more from the companies they invest in than financial gain alone, and are looking to channel their money to businesses that follow sustainable and ethical practices. The market for ESG products is already large – it is thought to constitute more than $20 trillion in assets under management – but there are signs it is about to get larger.
A new white paper by think tank New City Initiative is a case in point. According to the paper, 90.5% of boutique asset managers now include ESG in their portfolios versus just 47.6% five years ago. ESG criteria have evidently reached tipping point.
That this is so has predominantly been down to investor demand, but there is also now evidence of top-down momentum from regulators.
In the UK, for example, the Financial Reporting Council, which regulates auditors, accountants and actuaries, and which sets the UK’s Corporate Governance and Stewardship Codes, has suggested that fund managers take ESG factors into account when overseeing the companies in which they invest. The regulator has launched a consultation into a new Stewardship Code to frame how asset managers hold investee companies to account. If integrated into the Code it will be more important than ever for firms to ensure they have access to accurate ESG data.
This can represent a challenge for asset managers. As the importance of ESG data increases, firms will need to find the best way to source, validate and format this data for use in operational systems. With ESG data increasing in volume and coming from a wide variety of sources this can be a costly and complex process for in-house teams to manage alone.
The good news is that the market is responding to the momentum growing around ESG data. Cloud-based managed data services, such as those offered by RIMES, ensure that all ESG data flowing into a firm is up to date, and that all relevant indices are included in the data feed. Importantly, the data is provided in a format that can be used immediately in any in-house data management platform, removing the need for time-consuming and costly manual data integration tasks.
ESG may be a relatively new and fast-growing market for firms, but the same data management best practices apply. By taking the managed services approach firms can respond to the growth in ESG requirements much more easily and at a lower cost than with in-house alternatives. Firms that do so first will find themselves as a competitive advantage.
Contact us for more information on RIMES’ ESG data services.
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