Investment reporting in the ESG age: a call to action for asset managers

Regulatory and consumer pressures are changing the way buy-side firms report on the sustainability of their investments. Asset managers shouldn’t compromise their investment reporting by making small, piecemeal changes to their processes in order to ‘make do’, whilst ignoring the bigger picture and failing to plan for the future, suggests Abbey Shasore, CEO, Factbook.

With all of the regulatory and investor-driven initiatives coming down the turnpike in the asset management world, for most firms fundamental changes to their client reporting and fund marketing processes are now required. ‘ESG Performance Reporting’ is one such obligation, manifest recently in the Sustainable Finance Disclosure Regulation (SFDR), the European Union’s attempt to harmonise ESG disclosure standards across the continent. The SFDR provides a comprehensive sustainability disclosure requirement covering a wide range of environmental, social and governance metrics and criteria. The SFDR requires asset managers such as AIFMs and UCITS managers to provide prescript and standardised disclosures on how ESG factors are integrated at both an entity and product level. 

A significant portion of the SFDR applies to all asset managers, regardless of whether they have a real ESG or sustainability focus. The SFDR requires investee companies to report on 14 mandatory indicators (9 environmental and 5 social/governance), regardless of sector, in addition to 1 environmental and 1 social/human rights-related metric from a list of 33 additional indicators. Reporting of the first reference period began on 30 June 2023.

When you add SFDR to ESMA’s cross-border distribution rules and Assessment of Value (an initiative brought in by the Financial Conduct Authority (FCA) which requires Authorised Fund Managers to conduct an assessment at least annually for each of the funds it manages) you can see the pressure building on the investment reporting teams. These measures will require more fundamental changes to your reporting processes than you might imagine, including the need to ingest data from multiple sources in multiple formats. Taking a piecemeal approach to the problem will likely impair your firm’s ability to scale its reporting function and possibly also reduce the reliability and quality of your reporting. 

From my experience, investment management firms expect system vendors to be able to handle the requisite operational challenges brought about by regulatory and cultural change. For example, we recently helped a client by envisioning and delivering a fully bespoke Digital Client Engagement programme, including on-demand reporting for internal users (often C-suite executives), featuring sustainability and ESG profiling, and impact reports covering emissions and carbon footprint. Unfortunately, not all systems vendors are geared up to handle this kind of task.

Another recent client enquiry we dealt with surrounded the requirements of the TCFD. The Task Force on Climate-related Financial Disclosures (TCFD) developed a framework to help public companies and other organisations more effectively disclose climate-related risks and opportunities through their existing reporting processes. The client realised that if they failed to respond swiftly to the TCFD’s guidelines, the firm would run the risk of missing a mandated publication deadline. The issue here was that the firm’s Client Reporting team only found out they would assume responsibility for product level TCFD reporting in December 2023 and the deadline for publication of the 42 required reports is 30 June 2024.

Investment managers know their business landscape and appreciate that regulatory changes will occur on a frequent basis. They also know that they need to be working with a vendor partner that has the capability to deal with such reporting developments (perhaps through the deployment of tools like flexible templates and components). The more regulatory requirements, the more investment managers will have to re-examine their processes to ensure that they can thrive, not just survive. 

With ESG reporting, firms are having to gain access to and rely (even more than with client reports and fund factsheets) on the fact that the data they need to undertake that reporting has to be ingested from multiple venues. Unfortunately, there is no singular ESG performance reporting database that every investment manager can simply plug into, therefore the ability to connect with and utilise many different external data sources within ESG reporting is of paramount importance. Whether it’s just drilling down into positions or attribution data, firms are having to go to lengths that they have not dealt with previously. 


Investment managers are being buffeted by multiple regulatory winds simultaneously. Many of the issues raised in this article can be solved through vendors (in collaboration with their asset management clients) adopting the maxim of ‘do not make do and do not compromise’ in their reporting. By taking a holistic approach to the changes required you will be in a better position to serve your clients effectively now and scale for the future. 

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