ESG challenges and opportunities

Meeting an uncertain regulatory landscape

As the industry experiences a surge in demand for environmental, social, and governance (ESG) investments, this growth has been accompanied by an unprecedented level of regulatory pressure. The complexity only grows as changes in government policies and enforcement shift. Therefore, it’s crucial for leaders in ESG investment management to adequately prepare and put systems in place that can readily adapt to the regulatory and compliance risks that may arise.

Data: a focus area for ESG investment managers

To meet ESG compliance, investment managers are increasingly challenged with the sourcing of reliable third-party ESG data. It not only has to be accessed, but verified. While investment managers are accustomed to using service provider data (such as MSCI and Bloomberg) to inform investment decisions, ESG presents a unique challenge in not only evaluating the sheer number of data providers, but their quality. To meet this, we outline considerations investment managers can take to select a data provider that aligns with their ESG investment philosophy, strategy, and data requirements.

Streamline your ESG regulatory compliance

In 2023, investment managers expect to face increasing pressure to adapt to turbulent market conditions and evolving regulatory expectations. Firms that fail to engage in thoughtful discussions about their current ESG compliance and how they integrate ESG considerations into their risk management frameworks may face punitive consequences.

But taking proactive steps is about more than about enforcement avoidance. Integrating intelligent ESG regulatory considerations into your operations provides transparency which can lead to positive financial performance. ESG disclosure requirements are likely to increase, making data quality even more of an imperative.

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