More proactive approach must be the way forward

Mark Crathern, Head of NatWest Trustee and Depositary Services at RBS International, explains why a more proactive approach in the industry will bring greater benefits for both regulation and the investor.
By Mark Crathern

NatWest TDS is on the verge of an evolution in its working practices that will mark a step-change in the industry.

Historically, the asset management industry has relied on reporting that’s monthly or even annually in arrears. However, NatWest TDS has invested in digital tools and capabilities that allow close to real time daily ingestion of data and provide AI-enhanced output –on asset performance, liquidity, and even on ESG criteria.

“A passive approach to governance simply confirming past events is no longer the expectation of regulators and, increasingly, investors. We need to get to the point where we use data to predict events happening, whether that’s around reconciliation trends, liquidity of assets, or the performance against stated sustainable investment targets,” says Mark.

It’s a move which Mark acknowledges cannot be made alone, but one in which he aims to set a standard and take a leading role, with NatWest TDS being at the forefront of providing relevant insights, as well as championing important regulation advancements and investor protection.

Need for ESG transparency

Within the investment industry there’s a clamour for greater ESG transparency. NatWest TDS aims to identify investments that are making a positive contribution to UN Sustainable Development Goals and World Economic Forum metric requirements.

“We want to help investors have transparency in what they’re buying, how that’s impacting the world, and take the insights right down through the supply chain to what a Funds real footprint looks like, whether it’s from an environmental, social or governance perspective.

Governance sits at the heart

The unstructured and slightly chaotic way that ESG is currently discussed needs to change, Mark says.

“As funds evolve and become more impactful, depositories will need to monitor them more thoroughly; there needs to be consistent and structured governance to reduce ‘greenwashing’ concerns. We believe we have a real role to play assisting managers, auditors and regulators to create a reliable marketplace.

“If we can create a common framework, we can create a standardisation that will be a launchpad to create structure around this. We’re saying: ‘governance sits at the heart of that; verification and assurance that we can provide’.

“That’s ultimately where depositories now need to become more proactive whereby they’re prepared to talk about imperfections and challenges that sit within fund ranges; they’re prepared to ask difficult questions of the boards in a way that is constructive and motivated by enhanced investor protection.”

Greater insights promote proactive decisions

NatWest TDS has invested in a platform that will be interchangeable and can be “inserted into the fabric of the investment managers’ business because we know from a technology perspective there’s a lot of legacy systems out there that won’t all be updated in the short term,” says Mark.

“We’re not looking at just automating core depository services, we’re looking to use the data we are required to receive to go to Boards on a more frequent basis, to have more time to give them the insights as to both what’s actually happening within their fund and what could be perceived to be happening.”

“As a fiduciary we will now have live, close to real-time data. By having enhanced data we also need to act on it proactively by taking informed decisions”.

About Depositary Services
RBS International provides independent depositary services (through separate legal entities) to fund managers in the UK and Luxemburg, under both the UCITS and AIFMD regimes. Our services are not offered to any person in any jurisdiction where their advertisement, offer or sale is restricted or prohibited by law or regulation or where we are not appropriately licensed.