Session 16-1

Investing in Impact - Integrating ESG with Investment Management

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According to a study by Ocean Tomo, more than 80% of a company’s market value is now made of intangible assets; this includes intellectual property, market share, brand awareness, goodwill, and the perception of a company’s effect on society and the environment. From consumer goods to financial services, organizations have become increasingly cognizant of their impact. The “impact” of an organization can be captured through an ESG score typically calculated using several qualitative and quantitative data points. There are multiple such scoring methodologies currently available in the market. These scores hold more power than meets the eye – in fact, the score can be the difference between financial success and ruin. Take, for example, a footwear company facing a child labor scandal. This information will typically result in a low “Social” (the “S” in ESG) score within any scoring framework – information that would be visible to consumers. Armed with this knowledge, consumers can choose whether they wish to continue financially supporting the brand, and in many cases, they may withdraw their support as the organization no longer aligns with their values. The loss in revenue from decreased consumer purchasing and reduced investor confidence will prompt change faster than any public plea, and the brand will be urged to either change its behavior or risk a financial crisis. In the financial services space, this idea of ESG playing a role in investment decisions has only recently begun to become mainstream. Investment professions have started to recognize that the impact goals can be achieved while maintaining desired returns in their portfolios, despite the long-held belief that one must choose one or the other. Successful integration and application of ESG data can create a clear financial incentive for organizations to behave more impactfully, bending the arc of human history towards sustainability and justice. More than ever, investment decisions are now shifting rails from being “goals” driven to “value” driven. Given this newfound necessity of ESG data in the investment management space, there is a need for a solution that standardizes and integrates the disparate and complex ESG data with existing investment decision-making practices while maintaining fiduciary responsibilities. Such investment management ESG solution must address key areas such as the availability and quality of the ESG data, the ability to capture how investment professionals make or alter their choices using ESG data, and data management capabilities that unobtrusively integrate ESG metrics into investment practices while supporting the regulatory and client reporting obligations. ESG is one of the most rapidly evolving spaces and while such data products may seem complex, industry leaders across financial services have made great strides with ESG solutions built upon a data architecture that considers ESG risk, reporting, regulatory, strategic, and alpha-generation goals. This session will delve into the transformation of ESG data in the investment management space, and how addressing this data challenge has created a positive impact that will reverberate across generations to come.

Speaker

Harish Arora

Managing Director, EY

Anisha Khosla

Sustainability & Data Professional, EY