Apex Group has teamed up with Institutional Shareholder Services (ISS) to develop an environmental, social and governance (ESG) reporting service to investment managers.
A study from Aite Group in December 2018 highlighted the growing demands for analytics and reporting in ESG and suggested that securities services providers could be primed to step into the space.
ESG considerations are becoming a crucial factor for investment managers due to changing investor demands, regulations and reputational impact.
The reports will allow Apex clients to measure the ESG performance of each of their portfolio companies through accessing ISS’ Governance QualityScores, company carbon footprints, and conduct norms-based screening.
“The world’s largest asset managers are shifting their focus towards ESG investing and many are launching ESG dedicated products and also measuring ESG sensitivity across their broader portfolios and businesses,” said Peter Hughes, founder and CEO of Apex Group.
“The asset management space has made great strides towards delivering transparency to both allocators and regulators over the past couple of years, and the rise of ESG as a mainstream strategy is testament to how far the industry has come.”
Studies suggest these millennial investors are more socially and environmentally conscious than previous generations, prompting more managers to offer products with an ESG tint.
EU regulators – alongside investors – are also insisting the financial services industry becomes greener. EU proposals – as part of its sustainable finance initiative – will introduce clarity around how institutional investors including asset managers should integrate ESG into their decision-making.
These regulations are likely to force asset managers to disclose their ESG practices to investor clients. At present there exists a mix of voluntary and mandatory reporting requirements throughout the world.
Some of the mandatory regulations or policies include the Capital Markets Union, Shareholder Rights Directive II (SRD II) and Institutions for Occupational Retirement Provision Directive (IORPs).
A study from the Alternative Investment Management Association (AIMA), in June 2018 showed that hedge fund managers had allocated at least $59 billion to responsible investing (RI).