Today’s environment is changing the way investors evaluate companies. It’s becoming more granular, more sophisticated, and more receptive to ESG information.
Envestnet’s newly-created Environmental, Social, and Governance Office brings a centralized focus to ESG activities across the company. Group Head Ron Ransom will lead firm-wide efforts in developing programs and policies to support Envestnet’s corporate ESG efforts.
Envestnet provides wealth-management technology and solutions to registered investment advisors, banks, brokers/dealers, and other financial service firms. Its Tamarac platform offers trading, rebalancing, portfolio accounting, performance reporting, and client relationship management software to high-end RIAs.
Sustainable investing has grown in popularity, driven by increasing regulation and government focus, societal changes, investor conviction, and technological advance that make it easier to incorporate ESG into investment processes. However, advisors may dismiss ESG if they don’t understand its key distinctions or value propositions.
Among them is the potential for generating alpha and beta, which can help investors increase their returns without sacrificing risk or return quality. This is what some advisors and investors are pitching to clients, according to Dana D’Auria, co-CIO of Envestnet PMC.
Advisors who are pursuing ESG should do so with a strong ethical rationale and not just for the promise of alpha or beta, said D’Auria. That’s because it is difficult to prove that ESG can offer excess financial returns.
Companies that proactively address environmental and social concerns improve their brands. They build trust among employees, consumers, and investors, fostering loyalty and helping them avoid activist attacks.
Investors are valuing ESG performance more than ever, and they’re willing to pay a premium for it. And the trend is likely to continue.
Boards must understand the evolving ESG landscape to effectively capitalize on trends that drive long-term societal, environmental, and financial value. They need to oversee the integration of ESG factors into strategy and ERM, as well as how related performance is communicated.
As more and more data becomes available, the need for robust disclosure processes and controls increases. These are necessary to ensure that companies’ reporting is comparable and decision-useful, building stakeholder confidence in the data they provide.
A strong ESG approach can help a company build reputation, trust, and transparency. These attributes are essential for brand loyalty and driving sales growth.
The ESG movement is at a critical moment, driven by the expectations of investors, millennials, and Generation Z. Companies are increasingly recognizing the costs and benefits that they impose on society, such as pollution, waste, and water consumption, and are responding to these concerns by developing more sustainable business models and reducing their environmental impacts.
As such, more ESG data and standards are needed to improve the quality of sustainability information. This will allow more decision-useful and trustworthy information to be shared across the financial industry.
Envestnet has appointed Ron Ransom as group head of its Environmental, Social, and Governance office. He will lead firm-wide efforts to develop programs and policies that support Envestnet’s corporate ESG efforts. He will report directly to Dawn Newsome, Chief Business Operations Officer for Envestnet.
To measure ESG performance, companies need to understand their goals and objectives. This helps them determine which ESG issues are most important and prioritize their efforts.
Then, companies can set targets and KPIs to measure progress against these goals and build accountability for their results. This allows stakeholders to understand where the company stands and how it can help achieve its goals.
A business can then compare its ESG performance against other similar businesses and sustainability standards. This helps to build trust with investors and other stakeholders.
While measuring ESG performance can be challenging, different sets of ESG measurement frameworks and reporting standards are starting to converge. This is helping to create a standardized landscape for further regulation and third-party attestation.