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The change in values in society and politics has reached asset management: non-financial investment objectives are becoming more and more important. Suppliers and investors are increasingly scrutinized with regard to their handling of sustainability issues.
From niche to normality
Where do you stand in terms of CSR (corporate social responsibility)? What is your position on SRI (sustainable and responsible investing)? What influence do ESG (environmental, social and governance) criteria have on risk and return in your investments? These questions and keywords define a company’s approach to sustainability. Every financial services provider is called upon to position itself on this topic and to align its business and operating models as well as its product range accordingly.
Challenges
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 the future, different products will be in demand—financial services providers should therefore adapt their offerings accordingly. In order to be able to meet the demand for these new products, appropriate conditions have to be created:
- New providers for research and market data are needed
- Processes in portfolio management have to be adapted
- ESG parameters must be included in risk models
- Client communication needs to be adapted to the new circumstances
- ESG criteria must be included in product prospectuses in order to disclose the sustainability of an investment
Findings
However, in order for these different strands of action to contribute to the company’s objectives, it is imperative to address the issue of ESG as part of the strategy process. The integration of ESG requirements into asset management can only succeed if a holistic approach is pursued, taking into account the entire value chain.
The first building block for this is determining the status quo: What is our current position? What are the competitors doing? What is the benchmark? If this is transparent, the first step can be taken: defining one’s level of ambition in following sustainability principles. On the basis of the defined level of ambition and taking into account the existing client and product portfolio, it is then possible to identify growth potential and derive a product strategy. The optimization of the operating model and a change phase are the final steps of the process.
One stumbling block for integrating ESG requirements into the business model is market data—the need for data increases significantly and is therefore a major cost driver. To overcome this hurdle, a “golden source” should be defined on which all processes from portfolio and risk management to reporting are based. Selecting a suitable data provider and defining uniform sets of ESG KPIs is therefore crucial to success.
Solutions
With a clear view of current trends and comprehensive asset management expertise, zeb supports you in the integration of ESG requirements along the value chain - from site assessment to the ESG business model and its operational implementation:
Sustainability check—status quo assessment
Review of the existing ESG strategy/implementation
Competitor analyses and benchmarking
Derivation of ESG positioning
Development of a sustainability ambition level
Analysis of the initial situation
Determination of ambition level by means of innovative methods
Integration of sustainability into corporate strategy
Derivation of needs for action for implementation
Business model optimization
Analysis of the product and service portfolio
Identification of growth potential based on target client definition
Development of target offer (products, services, pricing)
Business model-specific business case
Operating model optimization
Impact analysis along the value chain
Identification and prioritization of fields of action
Integration into existing process and structural organization as well as IT
Business model-specific regulatory check-up
Governance and culture—change support
Inclusion of a defined ESG strategy
Development of communication and training concept
Support during the rollout phase and regular in-house checks
Development and implementation of optimization measures
