Investment and science are meeting at a socially responsible intersection, as institutional investors increasingly turn to new ways of deploying technology and data to up their ESG game.
Environmental, social and governance issues have been moving up on the agenda in recent years. Now they are coming to a head with the onset of regulatory demand; new guidance from the Department of Labor stating that investors can consider ESG factors in their investment without fear of repercussions; student protests; and general pressure from investors across the globe.
While data and technology are commonplace in the world of investment management, a renewed focus on the way they can be used in investing is underway, particularly when it comes to discovering the carbon intensity of holdings. Sources in the institutional investment and responsible investment industries highlighted announcements last month by Dutch pension fund provider PGGM to map the carbon footprint of its real estate portfolio, and French public service pension fund Etablissement de Retraite Additionnelle de la Fonction Publique to launch a virtual ESG platform, as examples of the trend.
Some institutional investors are looking at what others are doing to measure their carbon footprint, and acknowledge that the use of technology to aid ESG investment is a natural next step.
“We have considered carbon footprinting our public equity portfolio,” said Brian Rice, portfolio manager, corporate governance, at the $181.3 billion California State Teachers' Retirement System, West Sacramento. “We have talked to a number of leaders, but it is still a new industry and idea. We have always looked at carbon, but we question the ability to measure a carbon footprint and do it well, so we may or may not decide to do it. There are issues around it, particularly how do you manage a portfolio around a carbon number?”
Executives at the pension fund also think consistent disclosure requirements are necessary.
Globally, increased use of technology and data for ESG investment is in its infancy.
“The reality is we are in the very early stages of a significant IT revolution in this industry,” said Julian Poulter, CEO at the Asset Owners Disclosure Project in London. “The use of those services is incredibly immature.”