Inconsistency impacting outcomes, fund selectors say

Greater consistency in research approaches could help decision-making

A lack of clarity on impact outcomes, and an absence of ESG data on smaller companies, is making fund selectors’ assessments of investment manager products difficult.

According to a panel of four experts, speaking at the Expert Investor ESG Congress in Berlin, a lack of consistency of the research approaches by ESG data providers coupled with conflicting benchmarks being used by fund managers, is making it difficult to meet clients’ needs.

Addressing delegates at the Waldorf Astoria in the German capital, Rupini Deepa Rajagopalan, head of ESG office at Berenberg, explained that her organisation has resorted to asking individual investee companies to provide “missing data” in instances where it is necessary.

“We like to invest in small and midcaps, but because of a lack of data, we go out and find it, rather than use general benchmarks,” she explained.

“There are 13 different data providers that mention Impact, but they all do it differently. We engage with companies and ask them to provide the missing data.”

Panellists agreed that the forthcoming EU taxonomy will have a positive effect on how index and benchmarking businesses use the sustainability lexicon. While they said they do not believe that it will be the panacea, they stated that it is likely to stimulate the conversation by major players in the market.

“The EU taxonomy is a great start,” said Ms Rajagopalan. “It’s getting people to start thinking.”

Ralf Mielke, head of sustainable investments at Bank Julius Bär Deutschland, said while the taxonomy will help to provide standardised data, it is unlikely to have a significant impact on investors.

“The new taxonomy won’t help what every investor is doing. Every asset manager has his own way of interpreting its sustainability approach,” he said.

“Every investor has a different definition. So, the taxonomy will help to provide standardised data.”

Nicolas Crochet, managing partner of Funds For Good, said the taxonomy would at least allow clients to gain a better understanding of what is in their portfolio.

“The taxonomy at least has the advantage of setting a minimum standard,” he explained. “There is no choice. It’s coming and will bring transparency and clarity.”