The progress is slow and challenging – but it is there. For investors to get measures of their sustainability impact, a lot more standardisation and corporate data will be needed than is currently out there. A panel at AFME’s operations conference in London investigated how it could come about.
ISSB, Efrag, updated SEC reporting, an emerging EU taxonomy … the standards and data about companies’ sustainability impact are still disparate. Even so, the members of this Tuesday afternoon panel agreed that things are moving in the right direction.
“All these are starting to give a sense of direction in terms of how you will consider portfolios and how you will measure their evolution,” said Bill Stenning, UK head of public affairs with Société Générale.
On the panel, he was joined by Corinne Neale, global head of ESG applications at BNY Mellon Data and Platform Solutions, and Larry Abele, chief information officer of investment management and data firm Impact Cubed. The talk was led by journalist Lynn Strongin Dodds.
Carbon … and that’s it
Larry Abele summarised his firm’s attempt to relate differences in fund performance to underlying ESG factors. That is still opaque.
“We’ve seen a huge range across the European funds that even call themselves ESG funds. The only consistency we’ve seen across these sort of 30,000 funds we’ve measured, is that ESG funds tend to have less carbon than the benchmark. That is by far the most common trait that everybody seems to use. The social factors are almost entirely overlooked: gender mix, [the ratio of] executive pay to median employee pay, economic development, job creation … We’ve seen very little of this getting into the asset management industry yet.”
Under the wave of EU regulation (SFDR, the “taxonomy”, the “green deal”, the green bond initiatives …), the asset management industry and their investment-target business are asked to report a lot of data. The panel discussed to which degree this is data that is actually of use to investors. Corinne Neale of BNY Mellon concluded that there are many layers to the question, but on balance, she takes a positive view.
“I am very encouraged by the number of private initiatives that are actually trying to be constructive, and say, ‘well, for this particular purpose, that’s the type of info question that you would need’,” said Corinne Neale, mentioning an inititive by the Global Financial Markets Association (GFMA) as one among the many.
Hard work going on
In her own group’s issuer business, Corinne Neale is seeing the efforts from both sides to close the gap.
“What is really interesting is that issuers are turning to us, saying ‘what do investors really want’, and ’what should I be producing’. Investors are all over the place with what they are asking for and regulations do not agree on what they should be producing. So there is a real disconnect in the market between issuers and investors. But there is a real need for pulling them together, and investors are really trying to work together with issuers to pull this together.”
The Association for Financial Markets in Europe (AFME) ran its conference Operations, Post-Trade, Technology & Innovation Conference 2022 (OPTIC) in London on 27–28 September.