This Week’s Tech and Tool News: Moody’s Offers Purpose-built SFDR Solution

ESG Investor’s weekly round-up of news on technology and tools in the sustainable investing sector, including Moody’s, Northern Trust, Act Analytics, Impact Cubed, Investment Metrics, Instinctif Partners.

Moody’s ESG Solutions has launched a “purpose-built” data solution to help market participants meet the requirements of the European Union’s Sustainable Finance Disclosure Regulation (SFDR). Effective from March 2021, SFDR introduces disclosure requirements on a set of Principle Adverse Impact (PAI) indicators, which outline the ESG factors that lead to adverse sustainability impacts. When Level 2 compliance with SFDR commences in January 2022, PAI disclosures will become mandatory for all financial market participants as part of the EU’s strategy to clarify the sustainability of investment products, thus reducing ‘greenwashing’. Information on PAIs – which include issues such as anti-bribery, anti-corruption, respect for human rights, climate and environment, and social and employee matters – must be publicly disclosed on the websites of investment solution providers to augment their SFDR-aligned categorisations of their products. “We are committed to advancing sustainability objectives and providing essential data that market participants can rely on,” said Sabine Lochmann, Global Head of Moody’s ESG Measures. “Incomplete data inputs will lead to many challenges when responding to SFDR requirements – our extensive dataset aims to help investors overcome that hurdle.” The dataset currently covers 2,500 entities across 11 mandatory indicators. It will be expanded to cover more entities and all 18 mandatory indicators over the course of 2021. In addition to PAI data, Moody’s will offer SFDR portfolio reporting tools later this year that can deliver “deep insights into sustainability performance as part of an organisation’s PAI disclosures”.

Northern Trust is supplying a range of ESG investment reporting solutions to Marks & Spencer Pension Trust (M&SPT) to support oversight, governance and reporting of the £11 billion scheme’s investments. M&SPT uses the solutions to help track specific environmental risk indicators associated with its investments, to monitor the scheme’s ongoing alignment with its ESG objectives, and to support engagement with asset managers and stakeholders on investment strategy and asset allocation. The data will also be used to support M&SPT UK climate risk Task Force on Climate-related Financial Disclosures (TCFD) reporting, which becomes mandatory from October. Northern Trust also provides M&SPT with global custody, financial reporting and specialist fund administration and analytics for its private market portfolio. “We are determined that the impact of our investment decisions today does not compromise our payment of pensions in the future. The data and insights provided by Northern Trust allow us to meet our ESG responsibilities as we select and manage investments whilst supporting our overall objective to provide long-term security for our members’ benefits,” said Simon Lee, head of M&SPT and chief investment officer.

Act Analytics has released a new data product to help investors identify and respond to events which may have a significant impact on their sustainable investment strategies and portfolios. ACT Events leverages the natural language processing (NLP) behind the firm’s Act ESG Scores, to intelligently identify clusters of ESG activity in a particular period, on a particular ESG topic, representing meaningful ESG events as covered by in the media. Users will be able to quickly see the size and nature of recent ESG events, clustered around a central representative article, with the option to customize and filter events by categories informed by the UN Sustainable Development Goals. The launch of Act Events follows extensive market collaboration with investors looking to quickly identify either positive or negative ESG related company developments picked up in trusted news articles. Act Analytics uses NLP to generate news-driven ESG sentiment scores for stocks that evolve in real time, as new information becomes available.

ESG data and analytics provider Impact Cubed has launched an impact data and multi-asset portfolio reporting tool designed to help investors understand the contribution of sovereign debt-issuing countries to UN Sustainable Development Goals (SDGs). According to Impact Cubed, its pathway approach removes the bias toward wealthy nations embedded in traditional ESG risk scores and helps investors see the level of SDG performance weighed against each country’s rate of progress. This means portfolio managers and index providers can consider the ESG impact of sovereign debt, while investment managers, central bankers, economists, and researchers now have new ways to spot important trends based on differentiated ESG data. Asset managers with funds classified as Article 8 or 9 under the European Union’s Sustainable Finance Disclosure Regulation (SFDR) can use the new tool for reporting on impact. “Current ESG scoring approaches tie the hands of fixed income portfolio managers by penalising higher yield securities issued by countries whose level of achievement on the SDGs may be below average but whose progress is well above average. Our goal was to develop a simple intuitive framework for evaluating progress towards the SDGs,” said Larry Abele, Chief Investment Officer at Impact Cubed.

US-based investment analytics, reporting and data provider Investment Metrics has added a module to its Portfolio Analyzer factor analysis platform to help institutional investors and asset managers better understand style factor changes within portfolios. Investment Metrics’ style factor analysis products are designed to help institutional investors and asset managers determine which factor exposures impact portfolio risk and performance, including ESG. With the addition of DeltaZoom, institutional investors, advisors and managers can now better analyse markets and portfolios “with unprecedented insights in seconds”. Early adopters include HSBC Global Asset Management, Vontobel Asset Management and Polar Capital.

Instinctif Partners has launched a self-assessment tool that allows businesses to measure their performance against ESG requirements used by key stakeholders, including regulators, investors and customers. ESGOptic is designed to provide guidance for companies on how they are integrating ESG matters into decision-making, to maximise performance. By providing insight into operations, strategy and financials, ESGOptic allows companies to recognise longer-term opportunities for growth, faster and more efficiently than using financial data alone. ESGOptic uses a secure online questionnaire system to evaluate the integration of ESG factors across six core areas: sustainability and business objectives; leadership and accountability; risk and opportunities management; stakeholder engagement and collaboration; sustainability governance and management; and reporting, transparency and communication.

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

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