Fernando Rodríguez | In a virtual meeting held at the IEAF-FEF, sustainability experts explained the challenges they face in the ever-changing legal and operational framework surrounding sustainability at an international level.
Ramón Pueyo, Head of Sustainability and Corporate Governance Services at KPMG, pointed out that the first and foremost challenge for companies is to understand what ESG means and what it does not, since “there are different ways of complying with ESG regulations and at the moment we only have 10% of the EU’s forthcoming ESG taxonomy”. As proof of this, citing an MIT study, he explained that since sustainability rating agencies use a plurality of methodologies, their reports on companies reach similar results only on 60% of occasions, while in the case of financial risk certifications there is a much higher level of convergence in reports. On the other hand, he drew attention to how difficult it is to choose a standard for non-financial reporting and to the absence of instructions for evaluating things such as salary gaps or the salaries of CEOs, among others. In line with other speakers, he pointed out the scarce information on sustainability provided by companies, even though “the data offered is better than that of twenty years ago”.
Susana Peñarrubia, Head of ESG Integration-Active/ ESG European Equities Portfolio Manager/ Head of Utilities Team at DWS Investment GmbH, said that the biggest challenges for fund managers have to do not only with how to report on the sustainability risks of companies – “There is a demand for transparency, but we do not have enough information from companies” – but also with the information distributed to investors, which means “changing the periodical publications and product brochures” and with the fact that “we have to be highly trained to inform investors, as according to the regulation we have to ask investors about their preferences in sustainability”.
In that regard, Cristina Álvarez, Director of SRI at Caixabank AM, indicated that according to new regulation, from March 2021 all pre- and post-contractual information for clients will have to include sustainability risks and their impact on product profitability even though there is no homogeneity in standards and it is difficult to evaluate the negative impact of such risks on a wide range of ESG factors”. In this case, “we have a timing problem” and also “there is a lot of pressure from the regulator and from the investor who is interested in ESG investing”.
Ángel Borrego, Deputy Head of Discretionary Portfolio Management and Head of SRI@Impact Investing Spain at BNP Paribas, echoing other speakers’ views, commented on what he called the “regulatory tsunami” affecting collective investment managers with respect to the information they have to provide and their client relationship obligations. All that is forcing an internal internal change in organisations and even in the certification in sustainable finance. “We are not only going to have to inform, but also to educate the investor through clear and useful information,” he said. If we are to do that, there are two key factors: the data offered by companies and the standardization of that information so that it can be integrated into the investment process,” he added.
What does green mean and what does it not? How to integrate ESG (Environmental, Social and Governance) factors into investment analysis? How to integrate ESG factors into valuation and financial models for responsible investment?
ESG certification is becoming more common among financial analysts and fund managers.In Spain there are 165 EFFAS certified ESG analysts and fund managers. Throughout Europe there are 829 professionals with ESG certification.
EFFAS (European Federation of Financial Analysts Societies).