Environmental, Social and Governance (ESG) are a set of principles by which you or your stakeholders can measure the wider impact of your funds, investments, operations, and long-term strategy.
Why is ESG investments growing rapidly?
Nearly 4000 asset owners and investment managers representing US$110 trillion in assets are signatories to Principles for Responsible Investment (PRI). These asset owners have made commitments to responsible investment. As a result, capital flows into ESG funds and investments have accelerated and many Asset Managers around the world are incorporating ESG factors into their investment analysis. More companies are feeling the urgency to integrate ESG considerations into their investment approaches and ensuring that capital is allocated to sustainable initiatives.
Who we work with
Working with our partners ESG Integrate, we cover a wide spectrum of financial institutions including asset owners, investment managers, Islamic banks, corporates, Sharia compliant funds, family offices and government-controlled entities to manage environmental and social considerations into their governance and investment decisions for the long-term benefit and value of clients and society.
Areas where we assist
Since ESG factors vary from company to company, our ESG advisory services helps support the differing needs of investment managers at various levels of ESG maturity and challenges covering the following areas:
1. Policy Framework and Governance:
- Develop responsible investment policy in line with the Principles for Responsible Investment
- Conduct governance check and identify areas for ESG consideration
2. ESG Integration:
- Implement ESG approach throughout the entire investment cycle (pre-investment due diligence, portfolio, buy out) ensuring compliance with the Principles for Responsible Investment
- ESG due diligence support
3. Outsourcing ESG Management Service:
- Monitor and report on performance
- Examine processes and ensure ESG disclosures
- ESG reporting assessment
- Protect the reputation of ESG funds along with their investments and underlying assets with independent assurance
If you are a signatory of PRI we can conduct assurance in light of ISAE 3000 and help you demonstrate the value of your approach with credible ESG reporting.
How we can support you
With the changing landscape of ESG standards and regulations both internal and external stakeholders are pressuring companies to enhance their operating models and embed ESG practices. New and augmented regulatory disclosure requirements are being introduced on funds, investment products and business activities to assist investment decision-making. Towards this end, we can support you at all points in your ESG journey. Examples for illustration are provided below.
An asset manager is seeking assistance to implement ESG criteria (such as CFA Global ESG standards or EU Taxonomy) to ensure wider stakeholder acceptability. Depending upon the eligibility criteria selected for the ESG, the implementation will generally require a five-step check process with the following steps:
- Identify the activities conducted by the asset manager that will be eligible.
- For each potentially eligible activity, we will verify whether the company meets the relevant screening criteria.
- Verify that the DNSH (Do No Substantial Harm) criteria are being met. Investors of the asset manager using the eligibility criteria would most likely use a due diligence like process for reviewing the performance of underlying investments and would rely on the legal disclosures of eligibility from the asset management company.
- Conduct due diligence to avoid any violation to the social minimum safeguards stipulated in the ESG criteria.
- Calculate alignment of investments with the ESG criteria and prepare disclosures at the investment product level.
An investment company wishes to augment its ESG strategy. Here, we will conduct a ESG materiality assessment to help the company understand its most important ESG risks and opportunities and matters that can shape and inform its strategy. This exercise will involve a broad-range review of the company’s investment processes and portfolio makeup, as well as interviews with head of functions connected to these processes. The exercise will highlight important challenges and gaps in the company’s ESG governance structures and internal controls. We will then formulate our recommendations to help the company shape its sustainable investment strategies, such as changes to organizational structure, the introduction of new policies pertinent to ESG, and improvements in engagement, accountability and traceability of underlying assets.
If you are interested in our ESG advisory services or would like to arrange free consultation, please get in touch with our General Manager, Mansoor M. Ahmed: [email protected].