Panel: Differing standards make it ‘super tricky’ to be international player

Complying with a variety of sustainability disclosure requirements across multiple jurisdictions is becoming an increasingly difficult proposition, according to industry experts at an event in London.

According to Soojin Kim, head of ESG research at private market services provider Preqin: “It's super tricky being an international player these days, just for the number of rules that are coming out. Even if you narrow what you're looking at to just a few jurisdictions, keeping on top of the twists and turns is incredibly hard work."

Kim made the remarks at Alternative Investment Week 2023, hosted by the UK Sustainable Investment and Finance Association (UK SIF).

“One of the key themes discussed is interoperability, to able to actually use the same data for different compliance purposes. That is something that managers are crying out for”, said Kim.

As an example, Kim pointed to European fund managers having adapted to complying with Sustainable Finance Disclosure Regulation (SFDR) in the European Union, and now having to adapt to proposals from the upcoming Sustainability Disclosure Requirements (SDR) in the UK.

At a panel discussion on data sourcing, Justin Kew, a senior ESG analyst at Balyasny Asset Management, noted the sheer scale of disclosure in the public markets space.

“Within the public markets the biggest issue now is actually too much data, especially some European companies just vomiting data to you. They just throw everything out there. Then the issue is the relevance of those data points, to actually make sense of some and also have data comparability," he said.

Kew also pointed out that in their ESG ratings companies consistently hide instances in which they perform poorly, equivalent to schoolchildren hiding their lower grades and focusing only on any good marks they may receive.

PE a ‘basket case’?

At a later discussion on attracting allocation and demonstrating commitment to sustainability, Anastasia Guha, global head of sustainable investment at financial services firm Redington, urged a rethink on the approaches that should be made towards asset owners.

“We always thought of asset owners as a block, and it's absolutely not the case. You have pension funds, you have sovereign wealth funds, you have wealth managers, you have foundations and charities, and all of them approach sustainability differently," she said.

Gupta also noted that too often in the asset owner space impact and sustainability are conflated, in spite of the areas being “very different things” that can yield wildly different results.

When it came to private equity, Gupta went so far as to describe the sector as a “basket case” when it came to incorporating sustainability considerations into investment.

Explaining, she said: “[private equity] is far behind gathering this data, especially on the climate. I'm not casting any aspersions on the way they select their deals and the way they exit, but they are really behind on collecting data, and have spent far too much time saying there's no consensus and what should we do, a sort of hand wringing.”

At a panel discussion on driving progress in social issues, Lyn Tomlinson, head of impact and philanthropy at Cazenove Capital, also reminded the audience of the role asset owners have in engagement towards the net zero transition.

“Asset owners are phenomenally influential, because they can push everyone or leave. Right now we're not getting the capital out the door quickly enough. So I think asset owners really pushing the people who advise them and their trustees, whoever it is to actually really look at this area seriously is important”, she said.

This week, Net Zero Investor looked into how UK asset owners are concerned that, despite warnings from the United Nations and the IPCC of the risks of delayed action on climate change, short-term interests are trumping long-term interests of pension funds.