In a recent ESG webinar with three subject matter experts, we posed the following question: “How are managers monitoring their ESG risks and opportunities and how are they reporting this to the investors?”
Here are some of the insights we gleaned:
Reporting still varies widely between managers. The substance and style of ESG reporting is highly dependent on the fund managers themselves. A range of ESG understanding, varying management styles, personal reporting preferences and distinct portfolio strategies all contribute to very different interpretations of how to report ESG performance and risk.
Most ESG reporting is still qualitative. Although the lack of standardization is acceptable today, a move to more quantitative reporting will begin to take hold as global ESG standards begin to crystallize and gain traction. See our "ESG is Essential to Fundraising and Investor Retention" whitepaper for more details on these rapidly rising standards.
Consider two elements of reporting: the process and the output.
- Reporting on the process takes the form of a well-articulated ESG policy. It gets at how and why you are doing the ESG reporting that you are doing.
- Reporting on the output is reporting on the portfolio itself with both qualitative and quantitative data.
When a cohesive story based on this data from your output supports your thesis as communicated by the process that you have shared with your investors, you will inspire greater confidence.
The challenge of monitoring and reporting ESG still looms strong, as the demand for ESG investing continues to evolve and mature. The only “sure thing” seems to be the idea that ESG is here to stay, long term.
“We spent the last months building different ESG reporting solutions for managers based on feedback that we received or we went out and solicited from clients. During those conversations, the main messages that came across is that everyone is interested in ESG, and ESG is actually being seen as much as an opportunity as it is a risk.” – Daniel Johnson, SS&C
We explored several ESG-related topics, including monitoring and reporting, with three experts in the field in a recent webinar from Waystone, NorthPeak Advisory, and SS&C. That conversation was published in our free "ESG Governance for Fund Managers: How to do it Right" whitepaper. Download your copy to learn more about critical and timely ESG strategies.