With the SEC due to finalize a new regulatory regime around so-called ESG funds before the end of the year, the effect on direct investors and fund/asset managers is becoming clearer. But what – if anything – will be the impact on asset allocators?
We’ve already seen a glut of readily available ESG data for investment managers coming on stream from public market ratings providers. And while this is a boon for transparency it somewhat overlooks the needs of endowments, foundations, family offices, and other LPs/allocators. Looking beyond companies and assets there is little ESG data available on the managers who run the funds.
The upshot is that the market is only beginning to provide this missing part of ESG data that allocators really value. In fairness to bulk data providers, this is a very specialized requirement. A very bespoke understanding of ESG criteria is seen as critical to upholding each allocator’s own unique investment principles.
Allocator operations teams have earned a reputation for data ingenuity, and many have responded to this challenge by collating their own data on – for example – diversity, equity, and inclusion (DEI) stats on chief investment officers or fund staff in general. In essence, seeking to interpret the gender and minority representation of the people owning, running, and working at funds. A fund personnel diversity profile is the kind of manager-level ESG data insight that allocators want.
Allocator ESG data management starts with self-report surveys
However, collecting this data and then keeping it up to date is proving difficult. A June 2022 Knight Foundation study report on the diversity of endowments’ asset managers only received responses from 24 percent of its target sample.
That’s because, at the coalface of allocator operations, it’s down to hard-working back-office teams to draft, issue, and chase-up self-reporting surveys among their target fund and asset managers. Survey data then needs to be collected, analyzed, stored, and fed into operational due diligence checklists and CRMs to aid the decision-making process as appropriate. Allied to all that survey-based data are the allocator team’s numerous engagements with brokers, advisors, and key contacts where ESG is discussed, and meeting notes recorded. Again this is valuable data, peculiar to each allocator.
The expectation among allocators is that – before long – these DIY data sources can be joined by an optimum mixture of third-party feeds to build a complete ESG picture. One such example of ESG data on managers is Preqin, and while we’ve seen other providers there’s frankly nothing (yet) like the variety and volume of ESG data as we see on underlying portfolio companies.
Go for a customizable ESG dashboard within the modern RMS
The best place for wrangling and reporting on ESG data is within the research management system. Why, because all the workflows throughout the research and investment process are already supported and ESG is just another deciding factor to store, track, and action. This aids allocators in decisions as well as in accurately reporting against their ESG objectives. ESG data can also be imported from third-party data sources via API.
The problem for allocators isn’t ESG data overload – quite the opposite in fact. The point is that a weak, sporadic but ultimately improving ESG data picture for allocators – where every scrap is vital and new data sources need a flexible way to be tried and tested – is just the scenario for the modern RMS to add value and shine. After all, DEI and ESG metrics on each fund and institution will constantly evolve so it’s not just a case of capturing initial benchmarks but keeping that data fresh on an ongoing basis to chart the improvements fund managers are making.
ESG, of course, should not be assumed as solely a pre-allocation concept. We’ve seen how changing micro and macro-level events have thrown the spotlight onto the ethical considerations of investments in unexpected ways. Bipsync makes answers easier to come by, irrespective of the question. This reduces the stress and distraction of urgent fact-finding requests.
Want to see how Bipsync corrals ESG data as part of a complete, modern Research Management Software? Schedule a demo to explore dashboards, consult allocator RMS best practices with ESG data and discuss your unique requirements.
