Developing Concise ESG Portfolio Recommendations with Swiss Sustainable Finance

While some years ago there were not enough frameworks and systems to address ESG performance of investments, now there are almost too many. To avoid “not seeing the forest for the trees,” asset owners and asset managers are lacking a shared common denominator of which elements of the many current frameworks create the most understanding and value and should thus form the core of their communication with each other.

Swiss Sustainable Finance: Members Want Greater Clarity

As the importance of ESG transparency of investment portfolios continues its upward trajectory, asset owners and asset managers increasingly face pressure from stakeholders such as pension fund beneficiaries, asset management clients and civil society representatives to disclose the sustainability credentials of their portfolios.

Also, more regulators around the globe are mandating more ESG investment transparency based on complex taxonomies of economic activities or sophisticated methods to measure the alignment of portfolios with the climate protection goals of the Paris Agreement.

These transparency requirements seek to answer two questions. 1) Do the investments influence the sustainability of the planet and if so, how? 2) How do sustainability factors influence the risks and potential returns of the investments?

Swiss Sustainable Finance (SSF), an association that strengthens Switzerland’s position in the global marketplace for sustainable finance by informing, educating and catalyzing growth, worked with Sustainserv to develop a study of main overlaps of current requirements leading to a portfolio ESG reporting recommendation framework for asset owners and asset managers within the SSF membership and beyond. These reporting recommendations will support the audience in understanding and effectively communicating the sustainability of their investments amid a crowded field of varying potential frameworks.

The Result: An Economical and Balanced Reporting Recommendations Framework

The recommendations in the SSF study build on key elements of a number of current reporting frameworks that were selected in such a way that they convey the most relevant information in a concise manner. Asset owners and asset managers who apply this framework will be able to clearly and effectively report on the sustainability of their investments to each other and to the stakeholders whose interests they represent or have to bear in mind.

Building upon a next-generation approach inspired by the TCFD, the recommendations framework includes information about the ESG governance, strategy, risk management and targets of the organization (that is, the asset owner or asset manager) as context for selected key ESG performance indicators on the companies that form the underlying assets of the investments in the portfolios. It can be used freely by any asset owner or asset manager who wants to increase ESG transparency for their investments.

The Sustainserv team is looking forward to practical implementation of the new reporting recommendations by market participants and would be delighted to work with asset owners and asset managers who would like support in realizing the full potential of the recommendations for ESG transparency of investment portfolios.