Asset managers can stay ahead of the ESG curve by using data to demonstrate how differentiated financial returns and impact value can coexist.
As environmental, social, and governance (ESG) principles increasingly become a core business consideration, regulatory bodies have begun to discuss effective standards to ensure proper data management and reporting. For asset managers, who have long embedded ESG into their offerings, the demand for global standards and more sophisticated reporting provides opportunities to unlock value for investors and drive profitable growth. The question: How can they take proactive steps to integrate ESG into their overall investment strategy and prove the value it creates?
In ESG as an asset: Preparing your portfolio for the ESG future, James Catalano and Liz Ming outline the steps organizations should take to determine what ESG data is decision-critical and invest in its integrity. They include:
Getting prepared now for new standards by reviewing ESG data definitions: As standards become more concrete, firms will need to understand their data definitions and current measurement processes, in anticipation that further modification and transparency will be required by new regulation and/or standards.
Safeguarding the integrity of that data: While it is not yet a requirement to report to the market, if data is being presented to investors and investors are using the data to make decisions, asset managers should have confidence in the reliability of the data..
Understanding assurance options: With a focus on data integrity, assurance is growing more appealing. Investors can make more informed decisions given higher rigor and precision in data, and assurance can increase confidence ahead of possible SEC-required disclosures.
Setting yourself up to engender trust in your data: Trust is the foundation of thriving capital markets. By establishing rigorous reporting, you engender trust with stakeholders, and by assuring it, solidify that trust
First-movers will set the bar for data measurement, demonstrating with credible data why certain variables are not only business-critical but also impactful for the environment, society and governance.