This article follows an assessment of Responsible returns – Meeting client utility, seen here. BITA Risk^®, part of the corfinancial^® Group, considers how to put all the theory around Responsible Investing into practice.

In the last article, we looked at maximising the client utility by using ESG data to aid the investment process by avoiding risks and seeking opportunities, incorporating client preferences in portfolio management and stewardship. Being able to illustrate this to the client is key through portfolio-centric reports demonstrating the application of these processes to their portfolio. The key to success is bringing together six sets of data within a single system to maximise the use of each data set and the value that it can create while reducing manual processes and re-keying.

• One or more data vendor services
• The firm’s investment and RI narratives at issuer level
• The firm’s voting and active management actions
• The firm’s screening criteria
• Client preferences
• And every portfolio’s positions

This applies, regardless of the firm’s chosen taxonomy and data vendors, and indeed should support multiple ones allowing reporting across TCFD, SDR, SFDR, SDG, SASB and PLSA, as appropriate and required.

BITA Risk’s ESG Manager delivers on the need to collate this data to provide robust, detailed and easy-to-understand responsible investment analytics at the holding and portfolio level.

For the Central Investment Team, it provides model portfolio and research list, on-going monitoring against specified criteria as well as detailed exposure and what-if analysis. Regulatory TCFD reports are on-demand for all portfolios at any date, as are exposure trend reports. Asset narratives can be loaded for use in reporting across client portfolios, as well as disseminating information to investment managers.

ESG risk and opportunity analysis can be reported for any portfolio, including models and recommended lists, and not only be reported on at a point in time but monitored on a daily basis with exception reporting.

To aid clients, preferences can be recorded to match either a pre-determined set of screening criteria or client-specific requests. These typically align with the data vendors metrics, enabling both a great depth of granularity as well as standard definitions of the preferences aligned to the ESG, ethical, product exposure and climate change data. For example, IMs in one of our charity focused investment managers can select from over 400 metrics when aligning client requirements.

Not only are these preferences recorded as structured data that can be shared with order management and reporting systems, but the client portfolios are monitored for conflicts with them daily, along with exception reporting.

It automatically applies the following data sets to the holdings of any client portfolio; one or more ESG and carbon data services, the firm’s own scores and narratives and the firm’s voting and active management actions. Combining this with firm’s central screening criteria and client preferences in on-going monitoring, provides powerful insight, automated checks and controls, as well as valuable reporting.

We are currently working on the collation of data on a firm’s voting and stewardship activities, which will then be applied to a client’s portfolio on the basis of activities relating to assets held during the reporting period, further demonstrating a firm’s capabilities.

BITA Risk’s ESG Manager delivers ESG, Ethical Restriction, and climate data, management and reporting tools to IMs, demonstrating a firm’s Responsible Investment approach as applied to each client portfolio. In this way, we feel the tools to mitigate ESG risks, seek ESG opportunities, personalise the portfolio, and demonstrate the firm’s stewardship role are delivered, helping improve client communication and maximise their utility.

If you would like to discuss any of the points raised here, please contact us at resources@corfinancialgroup.com or see more information on our solution here.