ESG and asset management: watch this space!
SwissThink President Blaise Ganguin interviews Florian Grandcolas, SwissThink ESG Expert.
Blaise Ganguin
SwissThink President
Florian Grandcolas
Senior Consultant Sustainable Finance (ESG)
Florian has had a distinguished career as Head of Credit Research at Axa Investment Management, where he was extensively involved in the implementation of the ESG policies as member of the ESG steering committee. Florian is SwissThink’s ESG Expert, focusing on training and consulting.
“Florian, you just delivered a training to a French asset manager on Environmental, Social and Governance risks. Why is this subject important for them?”
“The training request is symptomatic of the larger trend for asset managers. They are gradually realizing that ESG risks are important to them for at least three reasons:
First, clients are asking questions about integration of ESG factors into investment processes as part of the tendering process for new contracts.
Second, with the acceleration of climate change and the evolution of social demands for the whole finance industry, these risks are becoming more important for them, with a need for systematic analysis.
And lastly (some would make it the first point), rapidly evolving regulation will require asset managers to report on the inclusion of E, S and G factors in their investment processes.”
“What were the key questions from course participants?”
“Course participants came from different parts of the organization, and their questions reflected this.
For analysts and fund managers, the concern is about making the analysis real: what does it mean to analyze Governance, or Environmental factors? How do
those relate to the credit quality of one particular issuer and to the investment decision?
There are data providers in abundance in the markets today and one can easily obtain a score based on various risk factors. However, it is much more difficult to relate these to the investment process.
Because we are Credit Experts with ESG proficiency (and not the reverse), we speak the same language as analysts, and we can train them on qualitative factor review and ESG risk prioritization where industry and business risk understanding is essential.
In contrast, team managers and sales representatives needed concrete illustrations of ESG factors, so that they could develop a narrative for their clients. With our product management background, we provided keys to make sense of what is often seen as a complex additional process.
I’m sure many of my industry colleagues will identify with this!”
“How do you see regulation evolving in the ESG space in the near future?”
“Different countries have worked on different areas. The UK focused on Governance rules and created a code that has since influenced the Netherlands for example. In France, article 173 of the energy transition law is pushing corporations and the finance industry alike to disclose the Carbon footprint or ESG methodologies.
Note that requirements are about disclosing what is being done or not done, not about forcing implementation as such. Given the complexity of the topic and the need for harmonization, the EU has asked a group of experts to develop a general method that could be used by all countries. The first results were out in June with a proposal on how to categorize green investments (so called Taxonomy) for example.
Many other elements will follow and will be transcribed in laws over the next two to five years... Watch this space!”
