ESG Policies and Stewardship Reporting
Globally, asset owners and investment managers are seeking to formalize their approach to environmental, social, and governance (ESG) issues by creating ESG policies and regularly reporting on their stewardship and engagement activities. The need for such information is clear, as ESG-related regulations and investor stewardship codes come into effect, combined with growing demand for transparency from clients and other key stakeholders. Our expert consultants help investors to produce ESG policies and stewardship reports aligned with best practices (such as those developed by the Principles of Responsible Investment), building on our experience working with clients from leading ESG and Stewardship teams at global institutions. Our consultants can advise on: key ESG themes to include, proxy voting guidelines, engagement priorities, and key trends in the field of responsible investment.
ESG Due Diligence
Identifying material ESG issues during an investment due diligence process can help uncover risks and value creation opportunities. A thorough understanding of ESG factors relevant to a particular investment may also impact valuations, operations, and strategic priorities. We work with private equity firms and other asset managers throughout the investment due diligence phase to identify material ESG factors, benchmark them against competitors, and identify areas to add value. We use our unique, systems-based approach to help our clients identify the right metrics to prioritize while looking at the wider system in which the portfolio company operates. We also work with our clients post-acquisition and throughout the ownership life cycle to measure, monitor, and report on ESG metrics.
Recognizing that increased financial returns can go hand-in-hand with responsible business, investors are increasingly motivated to incorporate environmental, social, and governance (ESG) factors into portfolio decisions. With impact investing becoming mainstream, many investors are seeking guidance on how to bring ESG factors into their financial models. We provide tailored investment solutions, which help clients to maximize portfolio performance and capture opportunities to reduce risks through sustainable investments.
Advanced ESG Data Analysis
ESG data can be gathered from a variety of sources, most commonly from corporate disclosures, but relevant information can also be gathered from regulatory filings, news sources, social media, corporate communications, industry / academic research, sustainability organizations, etc. ESG data from alternative sources can be combined with other types of analytical data to drive insights on ESG momentum, which can be consumed in various ways. We work with clients who are seeking ESG integration solutions; in this way, data analysis can enhance and be integrated within a traditional investment process.
ESG Factor Optimization
Active ESG investors have moved past negative screening strategies to achieve their ESG objectives without sacrificing returns. However, the successful integration of ESG factors into an investment strategy requires a detailed understanding and interpretation of ESG data; simply selecting the top ESG performers may not satisfy an investor’s portfolio construction goals or drive impact. Our deep understanding of ESG data methodologies—including their current shortfalls—allows us to overlay our expertise while working with clients to optimize ESG portfolios for custom ESG ideas, themes, or goals.
ESG Materiality Maps
Different sectors and industries are exposed to different material ESG issues. The purpose of a materiality map is to highlight the ESG issues that are most likely to impact a company’s financial performance based on the sector or industry in which it operates. It also includes metrics that can be used to measure a company’s performance on an issue and benchmark its performance compared to its peers.
Our team combines its expertise of ESG issues at the sector-level with deep knowledge of leading ESG frameworks to produce decision-useful materiality maps that can be used by investors in their asset allocation decisions or engagement practices.
As investors become more sophisticated at ESG integration, they begin to see opportunities for improving the performance of their portfolio companies through engagement on these issues. Engagement could mean focusing on a specific company or participating in broader initiatives. Both require resources, and so investors need to make careful and strategic choices about where to focus their efforts. They also need to be as effective as possible in doing so. We work with clients to determine which engagement activities will be of most value to the firm in both strategic and financial terms. We then assist them to ensure that these engagements produce the desired outcomes. We are very familiar with many of the most important collective engagement initiatives in this area and we can advise our clients on which of them to participate in.
Corporate Social Impact Funds
The role of corporate actors in society has significantly evolved over the past few decades. Corporates are now widely recognized as accountable to shareholders, employees, and the communities in which they operate. We advise corporates that have embraced this shift in expectations and seek to produce positive impact for their stakeholders. This can be through establishing corporate-funded impact investing funds or simply through implementing practices to measure and report on existing efforts.
The ESG space continues to make great strides as it enters the mainstream. However, it can be challenging to interpret the nuances of different disclosures, materiality frameworks, and ESG metrics and scores. It can also be difficult to understand how ESG relates to corporate practices, as these differ by industry, sector, and market cap. We work with our clients to help them make sense of it all by listening to their ESG goals, leveraging our team’s academic-based approach, and performing customized research to deliver precise solutions.
FEATURED CLIENT CASE STUDIES
Integrating ESG issues into quant investment models for Aviva Investors
The Aviva Investors equity quant team wanted to better understand if their proprietary quant model can be enhanced through the integration of environmental, social and governance data sourced and/or captured by their global responsible investment team