Kroum Sourov: There are still no common industry standards, and funds need to navigate an increasingly diverse landscape of data providers and key performance indicators. Furthermore, with the proliferation of thematic funds, an investor can customise their investment portfolio, but that presents additional difficulties in reporting.
“Funds need to navigate an increasingly diverse landscape of
data providers and key performance indicators”
Most data that is available is reported with a delay to the data aggregators, so often it is the case that the reports investors receive from asset managers includes financial performance for the current period while key performance indicators refer to past periods due to the nature of ESG data.
Kroum: The most important step an insurance investor can take is to understand the methodology of the investment process of the funds in their portfolio.
Data reported should only be viewed in the context of the role it plays in investment decision-making of the asset manager.
Once the insurance investor is comfortable with the ESG investment methodology of the fund they are investing in, then the data reported on fund level should reflect that methodology.
Kroum: The more transparent fund reporting is, the easier it becomes to process the additional information ESG reporting provides. In general, the different data reported by a fund should lead to similar conclusions.
“Understanding of how ratings and reporting are
generated is essential”
Relying on third-party assessment, especially fund ratings, is a double-edged sword, as it would depend on the methodology of the rating provider, which might not correspond to the philosophy of the investor or of the funds they want to invest in. Again, understanding of how ratings and reporting is generated is essential.
Kroum: Using key performance indicators from a publicly available, reputable, and free to access source is key. This is meant to supplement any fund-specific data that is reported, with the goal of establishing a common ground between products.
“Using performance indicators from a publicly available, reputable,
and free to access source is key”
When the data used is available to use by the general public, then any investor would be able to make an initial comparison between funds, in order to narrow the choices they have.
Data supplied by institutions such as the European Commission via the EDGAR platform (Emissions Database for Global Atmospheric Research) is a good example of transparent, free, and common data source that can be used for emissions calculations.
