When it comes to ESG client reporting there is often a significant focus on what data should be reported and how to automate it – and with good reason!

No clear guidance currently exists on what to include in an ESG client report and many tech solutions are often not flexible or nimble enough to accommodate the need for customisable reports within an ever-evolving space.

In May we published a whitepaper on the three key challenges asset and wealth managers are facing when it comes to ESG client reporting, and Opus Nebula’s solutions to these (you can access the whitepaper here).

In this month’s blogpost we want to offer you a little treat: a 10-point checklist to ensure your ESG client reporting is as effective as possible.

This checklist is not about what you are reporting, but rather how you are reporting it. This is absolutely key if you want to make sure you meet investors’ expectations and provide ESG information that is clear and actionable.

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Therefore, we suggest that you go through the checklist below to guide you through your ESG client reporting process …

  • Relevant – Your ESG client reports should only contain information that is relevant to the fund or portfolio being reported on. For example, it might not make sense to report on air pollution, if this is not material to the industries invested in. This is true for active ownership information as well – you should only report engagement activities relevant to the securities of the fund or portfolio being reported on.
  • Tangible – Most people cannot imagine what a reduction of a certain amount of CO2 emissions means. It is therefore key to represent these values in a format that makes more sense to the reader. For example, reductions in CO2 emissions is often represented by the number of cars taken off the road, or trees planted, but this approach could be replicated for every ESG metric, such as waste, pollution, water usage, etc.
  • Milestone Focused – With respect to active ownership it is important that you set a clear plan and milestones for the engagement activities undertaken with investee companies. Reporting needs to evidence that these milestones are being worked towards, as well as providing explanations of any challenges and setbacks.
  • Historical – Investors want to see changes to metrics over time, and they do not want to have to compare different reports to get an overview. Therefore, it is essential that each report contains historical figures as well as the latest.
  • Explained – Investors want to understand how the ESG information reported impacted the decisions made by the portfolio or fund manager. Managers should therefore provide their interpretations of the information reported and whether it has been material in the decision-making process.
  • Action Focused – This is strongly linked to the above point. Investors and society as a whole demand change – especially with respect to the environment – and reporting should therefore focus on the actions that have been taken by the managers based on the ESG information obtained in the reporting period.
  • Transparent – ESG, and responsible investing more broadly, have been accused of being exaggerated marketing campaigns. In order to prevent discreditation of your ESG activities, being transparent is absolutely key. ESG client reporting is not about reporting on all the successes over the reporting period. It is about reporting an honest view of the state of the investments, and this includes reporting on challenges and areas requiring further improvement.
  • Comprehensive – ESG client reporting should not just be produced for flagship sustainable funds. It should be produced for all funds and portfolios across all asset classes. This can be a challenge if ESG client reporting is produced manually, but very straightforward to achieve where the report production is completely automated.
  • Clear – The vast majority of investors are not ESG experts, and you must therefore ensure that any technical terms within your ESG client reports are thoroughly explained. Any person, without prior knowledge of ESG topics, should be able to pick up your ESG client report and understand it.
  • Creative – Lastly, your ESG client reports need to be creative. Investors expect to receive ESG reports that are engaging, they do not want to see grey, tabular reports that look like traditional financial reporting.

Hopefully you’ll find the above aide memoires useful and informative, and please feel free to share this checklist with your colleagues to ensure that your ESG reporting is as effective as possible.

If you have any questions about any of these points, please contact us. We would love to discuss your client reporting challenges, and tell you more about how our SaaS reporting solution brings flexibility, efficiency and scale to your all your client reporting.