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Putting ESG into Practice: 5 Key Lessons

27th Sep 2022
The AIMA: Putting ESG into Practice 2022 conference delivered a broad range of topics to investment managers, service providers and consultants. As part of the programme, speakers debated and discussed key topics, but some themes and messages were repeated throughout the day.

Victoria Gillespie, Head of ESG Services, attended along with the ESG Services team, and also hosted a lunchtime panel discussion on ‘Achieving Net Zero’. Here she summarises the key points from the event:

  • Go back to basics

One speaker announced: “Do whatever you do with integrity and be able to speak to that rather than be all things to all people.”

Consider ESG, but identify what that means to the business first, then how good practices can be implemented that meet the original organisational objectives. It should be complementary to the business or identify areas for improvement.

When considering ESG within Funds, consider HOW and WHY. What is the investment objective: what does the investor want and how can that be achieved by the manager?

 

  • Keep it simple – avoid jargon

Stakeholder perceptions and understanding of anything ESG can cause confusion. If you are focused on climate reduction, state in simple terms HOW and WHY this will be achieved and measured. This simplicity is sometimes lost when we start to talk about ESG.

Make sure the intention of any action, fund, product or service, is simple.  Use examples that help listeners, investors and stakeholders understand what is being said. How can we drive change if we are not aligned?

 

  • Everyone has a role to play

Capital allocation is needed to drive change, therefore everyone involved within the process has a role to play in making that happen. This may require cultural change, which takes time.

Understand that ESG is not one thing. It is BROAD and goes further than just exclusions, SFDR/product labels, or EU Taxonomy referencing.

Companies need to imbed ESG practices into business and operations, and be ready to showcase and demonstrate this. This applies at both the Corporate and Fund level.

 

  • Focus on quality and relevance, not coverage

The ‘data providers don’t have good coverage’ headline is old news and really not warranted.

Focus should be on the quality of data for the market sector that is being invested into, not quantity of coverage. For example, some country laws prevent asking the gender of an employee. Therefore how can a data coverage company account for workplace demographics, when it cannot disclose its gender diversity?

ESG frameworks, both elective and regulatory are plentiful. While the global consolidation exercise continues, users should seek to use the frameworks that support their own needs; focusing on quality of information that can be identified and measured.

 

  • Collaborate

Regulators and Non-Government Agencies (NGO’s) are working together to find common ground for ESG aligned disclosures. However, there will not be one outcome that suits everyone, or meets the needs of every political agenda.

There are resources available. Several best practice frameworks and handbooks have emerged over the past 18 months, including the AIMA ESG Handbook, dated September 2022 and the Impact Investing Institute has many training and user guides for anyone to access and use.

 

AIMA is one of many industry bodies supported by JTC through its ESG Services team. To find out more, please contact Victoria directly, or visit the dedicated web page here.

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