The landscape of sustainable investing in 2023 has evolved from a realm of aspiration and confusion to one marked by maturity and clarity. A scalable sustainable investing framework requires an integrated focus on three elements – good governance, data collection, and analytics & reporting. In our latest whitepaper, we highlight these three building blocks and share additional resources and examples for each.
Sustainable Investing Governance
Effective governance forms the bedrock for successful sustainable investment strategies. It entails firmwide alignment on objectives, the composition of investment teams, establishment of clear policies and procedures, and senior management oversight. Specialist advisory firms and major players in the industry offer valuable guidance in creating robust governance models.
ESG Data Collection
Data collection remains a significant challenge. Variability in metrics across industries, investment structures, regulatory requirements, and differing frameworks and standards pose hurdles. This challenge has sparked efforts to standardize and streamline data collection processes. To address some of these challenges, we list nearly 10 ESG data collection frameworks available on DiligenceVault including PRI, Modern slavery, DEI, PLSA, and EET.
Further, in this sustainable investing framework whitepaper, we discuss three distinct segments of data collection that we observe in the industry today.
- Carbon accounting metrics
- Diversity, Equity, and Inclusion (DEI) metrics
- General ESG information
Lastly, we also share insights from a survey of over 800 asset managers on data collection approach and priorities.
Role of Analytics and Reporting in Sustainable Investing
In this section, we discuss how the industry is now focusing on analysis of the data collected, both on a portfolio level as well as evaluating changes over time. Risk assessments and custom ratings are also becoming quite popular as firms create an auditable and defensible framework. For firms which are focusing on impact investing and stewardship have also developed engagement tracking dashboards to enable transparency in progress vs sustainable investing goals. And ultimately stakeholder reporting takes center stage in a fast moving area.
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