Reynir in IPE: PE must work towards measuring impact of sustainable investing

While EU regulation is a positive development, which will bring greater standardisation to ESG reporting, investors, organisations and regulators must aim to go further.

With those words, Reynir introduces a letter to the Investment & Pensions Europe (IPE). IPE is a pan-European publication aimed at professionals working in institutional asset management. Summa’s founder and managing partner argues that we must move past the idea of ESG as a ‘nice to have’ and treat it as seriously as we do traditional financial accounting.

 

ESG reporting today: A tick box approach

Under most current frameworks, ESG reporting typically involves completing a list of requirements to confirm that firms consider various factors when investing. One leading example is the Principles for Responsible Investment (PRI), a voluntary framework which asks firms to make disclosures about the processes and structures that they have in place.

Questions might include: Do you have a sustainability policy? Or: do you have a dedicated ESG leader? The EU disclosure regulations will largely take a similar tick-box approach, while also considering certain key adverse outcomes.

A tick box style of reporting has its value, acting as a minimum standard if you are a responsible investor. It enables firms to understand how to encourage sustainable investment practices and the right processes and behaviours to avoid negative externalities.

However, according to Ryenir, where it falls short is that it purely looks at inputs, rather than the actual results of those policies and practices. So, a firm might have a sustainability policy, but how has that translated into reducing carbon emissions or resource efficiency in portfolio companies?

Read the entire article at Investment & Pensions Europe (IPE).

 

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