ESG stands for Environmental, Social and Governance standards. These criteria help alternative investment fund managers in their communication with their final clients by assessing their responsibility towards environmental issues and their stakeholders. To do so, players need efficient reporting tools to include these additional criteria in a relevant and transparent manner.
Designed to support robust and sustainable investment decision-making, ESG reporting helps assess risks and opportunities related to company performance in critical areas such as climate change, executive compensation, diversity and social risk prevention. So how to collect and integrate this extra-financial data automatically into financial and organisational flows?
Making extra-financial data count
In recent years, there has been an increased awareness of environmental, social and governance issues. Indeed, investors are now integrating more non-financial information into their analysis.
More specifically, ESG reporting focuses on measuring three standards.
- From an environmental point of view, elements assessed are: waste management, greenhouse gas emissions reduction and environmental risk prevention.
- Social standards include: accident prevention, staff training, respect for employee rights, the supply chain and social dialogue.
- The governance criterion ensures: the independence of the Board of Directors, the management structure and the presence of an audit committee.
Many reporting frameworks, including the Global Reporting Initiative (GRI), are increasingly used by asset management players to meet transparency requirements.
Making ESG data a powerful performance indicator
Transparency has become the watchword. With this in mind, ESG data provides an invaluable reference tool for analytical research and long-term sustainability. The question is how to access, integrate and automate this data in its financial reporting to make it a performance indicator.
The complexity for alternative investment fund managers often lies in the access, reliability, collection and integration of ESG data. In addition to this, frameworks are diverse. Indeed, there are multiple reporting frameworks. This often leads to a lack of robustness, comparability and reliability in the reporting activity.
DOMOS apps provide access to raw data and a flexible reporting tool, allowing managers to customise their ESG reports based on their own values or the frameworks used, such as GRI. In addition, these apps enable them to identify trends, benchmark data, integrate this data with financial measures, monitor fund coverage and report in the most appropriate format or as requested by an investor, in particular.
As a key performance indicator, ESG reporting allows sustainable investment decisions to be quickly measured and transparently explained to investors.
Corporate Social Responsibility is at the heart of alternative asset management. By integrating ESG criteria, asset managers are part of a sustainable risk management approach.
Start your ESG reporting journey