Developing and implementing a robust approach to ESG continues to rise in priority. Fund managers face unprecedented pressure to adapt and evolve in today’s rapidly changing financial climate.
Your administrator can play a critical role in the ESG ecosystem. Three prominent examples include:
- Aggregate and synthesize ESG ratings data
- Reporting and benchmarking in an investor-friendly manner
- Being a compliance failsafe amid new and complex ESG standards
Synthesizing ESG ratings data
ESG is relatively new and less quantifiable than other financial metrics. This results in a variety of different rating systems. A high score with one system may be a low score somewhere else. To achieve a reliable sense of your fund’s rating, you need an aggregate score that uses systems most relevant to your ESG strategy. Structuring this aggregate score (not to mention interpreting and validating it) is not a trivial task.
Fund administrators that assist or even lead this process can be invaluable ESG partners.
Reporting and benchmarking
Sourcing rating data is only half the challenge. Savvy investors that prioritize ESG will not be satisfied with a simple “9/10” rating. An ESG report should strike a balance between detailed and digestible. They should include sector-specific benchmarking and KPIs for portfolio companies.
Achieving this balance requires a strong capability for analytics and data storytelling. Look for fund administrators that can pair their data aggregation with a reporting service.
ESG standards failsafe
Related and intertwined with ratings and rating companies, there exist many ESG standards. These are set by independent, non-profit boards such as the Sustainability Accounting Standards Board (SASB). Adhering to such standards provides a pathway towards actualizing an ESG strategy and attaining better ratings.
An administrator with a comprehensive ESG offering will not only be able to collect, crunch and report the numbers, they will also be able to act as a strategic partner in keeping you aligned with current, new, and evolving standards.
We explore these topics, as well as several others in our free "ESG is Essential to Fundraising and Investor Retention" whitepaper.
Alternative Investments, EMEA, Fund Administration, Real Estate & Property Management