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The new ESG requirements of investors and supervisory authorities have a significant impact on the entire value chain in asset management. Sales as well as front, middle and back office functions are affected by ESG requirements. In addition, there will be demand for other products or products modified by ESG integration in the future – financial services providers should revise their offering accordingly.
To ensure that sustainability contributes to achieving the company’s objectives, it is imperative to include ESG in the strategy process. After all, profit-oriented ESG integration into asset management can only succeed if a common understanding of the level of ambition and a suitable development path are defined. In order to anchor sustainability permanently in the corporate culture, employees and managers must be trained and, above all, convinced. Sustainability should be the “new normal” in both professional and private life.
In addition, regulatory requirements need to be assessed and integrated – with the availability of ESG data in particular becoming a significant driver. Efficient implementation requires a holistic concept along the value chain, and
- the selection of a data provider as a “golden source” with which all requirements from portfolio and risk management to reporting can be covered, or
- a differentiated approach that combines different, specialized ESG data providers for different asset classes and ESG strategies and, where appropriate, can also include the company’s own as well as public ESG data analyses.
“Many asset managers claim that they include ESG principles in their decisions. But frequently their intention isn’t reflected in reality.”
Manuel Hobisch, Senior Manager, zeb
Current trends and challenges
- ESG strategy – developing an ambitious and credible ESG strategy for companies and products
The definition and continuous development of an ESG strategy at company and product level is absolutely essential as a basis and should be done with an eye on the market and the competition. Sustainability is increasingly considered mainstream, and it takes a high level of ambition or innovation to position oneself as a market leader. Defined principles, visions, goals and planned ESG activities constitute a framework for the path towards a sustainable company. However, corporate strategy, product portfolio and public image must be consistent in order to achieve credibility with customers. - Regulatory compliance – taking into account continuously increasing requirements
Increasing regulatory requirements, e.g. the Sustainable Finance Disclosure Regulation (SFDR), MiFID II sustainability preferences and the EU taxonomy, have changed the entire value chain in recent years – from sales to product and portfolio management, risk management and reporting. Asset managers need to not only recognize the challenging and complex requirements, but also to implement appropriate measures and meet day-to-day demands. - ESG data management – building a strong foundation for transparency
Sustainability is characterized by ecologically, socially and economically responsible action. Additionally, it is important to make these actions transparent, traceable and verifiable. To meet transparency requirements, asset managers need to provide a variety of information, e.g. about their investments and the underlying processes, through different channels, including pre-contractual and periodic documents, websites and technical reporting formats (e.g. EET). However, doing all this is not easy: the lack of internal processes, the limited availability of data, which is especially problematic for non-liquid asset classes (e.g. real estate), and last but not least insufficient data granularity are challenges that asset managers have to face. - Intrinsic motivation – creating and enhancing awareness of sustainability among employees
For asset managers, it’s ultimately not just about proclaiming ESG by ensuring compliance, data availability and strategic cornerstones. Instead, they need to incorporate awareness of sustainability at all levels of the company and in all areas and generate intrinsic motivation to increase sustainability. This cultural and progressive change can only be achieved by scrutinizing thinking and behavioral habits and launching new sustainable initiatives. Regular training on regulatory and market changes regarding ESG is particularly helpful in making employees aware of the topic and ensuring that they can properly advise customers and investors.
Our consulting services
Strategy and business model
- Strategic realignment in consideration of sustainability aspects
- (Further) development of the sustainability ambition
- Market and competitive analyses or benchmarking with relevant asset managers
- (Further) development of fund solutions and other product offers
- Development of dedicated use cases for sustainability efforts
Regulations and compliance
- Impact analysis of regulatory requirements, e.g. taxonomy, SFDR and MiFID II
- Identification of important fields of action along the entire value chain
- Implementation planning and support regarding new sustainability requirements
Data management, IT and reporting
- Review or (further) development of the ESG data strategy, especially in portfolio management
- Make-or-buy decisions regarding ESG software solutions
- Definition and development of reporting processes and formats
- Development of AI-based tools (ESG ratings and ESG trend analysis)
Governance and culture
- Development of communication and training concepts for employees and executives
- Support during the rollout phase of the new sustainability strategy and regular checks
- Development and implementation of optimization measures in front, middle and back office
