Evaluating asset management sustainability skills

Over the previous 24 months asset house owners have been resorting to a six-pillar strategy when evaluating how properly asset managers are integrating sustainability into their portfolios.

The six-pillar strategy, which is finest exemplified by the World Wildlife Fund (WWF) in its Sustainable Finance Report 2021, features a framework that covers the next six areas of an asset supervisor’s sustainability integration focus – objective, insurance policies, processes, folks, merchandise and portfolio.

In Asia, different asset house owners, significantly Japan’s Authorities Pension Funding Fund, are utilizing related frameworks with various levels of variations personalized to the precise necessities of their establishments.

When it comes to strategy, the WWF RESPOND framework leverages the extra popularly-known Process Pressure on Local weather-related Monetary Disclosures (TCFD) framework, however it’s not precisely the identical. First, the WWF framework is extra targeted on wanting into funding and danger administration information factors as they relate to asset managers. Second, the TCFD framework covers a broader set of knowledge factors that apply not solely to asset managers however to corporates and different kinds of organizations and entities.

At this level, extra entities which are within the means of present process sustainability integration need to the TCFD framework due to its broader protection. Nevertheless, the large quantity of knowledge factors coated by the TCFD framework, in addition to different elements, might be intimidating to smaller and medium-sized organizations.

In comparison with the TCFD, the WWF framework is less complicated though it’s extra targeted and restricted to investments. Alternatively, it’s broad sufficient to be a place to begin for entities, apart from asset managers, starting the method of environmental, social and governance (ESG) integration.

In  phrases of objective, for instance, the framework contains 13 information factors that cowl the relevance of sustainability in a company’s technique and funding beliefs, in addition to trade collaboration and participation. When it comes to insurance policies, the framework contains 29 information factors that cowl accountable funding and different issue-specific insurance policies.

When it comes to processes, the framework contains 18 information factors that cowl analysis, inventory choice and monitoring, and energetic possession. When it comes to folks, the framework covers 14 information factors on governance, expertise and incentives.

When it comes to merchandise, the framework contains 4 information factors that cowl product availability and shopper engagement. When it comes to portfolio, the framework contains 17 information factors on topics like danger evaluation, metrics and targets, and disclosure.

The response framework has been examined by the WWF as a part of its sustainable finance report entitled “Reply – Resilient and Sustainable Portfolios, 2021 Assessment of Accountable Funding Practices”. The report was designed to evaluation the sustainability practices of Asian and European asset managers utilized by WWF for managing its portfolio.

In 2020, confronted with the Covid-19 pandemic, WWF tailored shortly to ship on conservation objectives and elevated its spending on conservation programmes by 17% in contrast with the earlier yr. WWF raised US$276 million in FY20, 13% greater than in FY19, based on its annual report.

The WWF framework can also be the idea of a web-based interactive device developed by WWF-Singapore to assist asset managers enhance portfolio resilience and alignment with a low-carbon and sustainable future by way of the appliance of science-based approaches to accountable funding (RI).

Often known as the RESPOND (Resilient and Sustainable Portfolios that Shield Nature and Drive Decarbonization), the interactive on-line device homes detailed findings from the RESPOND evaluation and permits customers to discover how asset managers are implementing RI and to grasp the alternatives for additional management on this space.

“Covid-19 is a manifestation of the dangers related to the destruction of pure capital, which is significant to our collective social and financial well-being,” says Keith Lee, senior vice-president,  Asia sustainable finance, WFF. “As we all know, nature loss is intrinsically intertwined with local weather change and asset managers might want to deal with each challenges by adopting sturdy, science-based standards of their investments and expectations of Asia’s company sector. This can allow them to enhance their competitiveness and the resilience of their portfolios, whereas scaling up their contribution to sustainable improvement.”