A Nobel Foundation data provider has launched a service which checks whether investors can comply with tough sustainability definitions proposed by the European Union.
The provider, Impact-cubed, is a partner to investors including Polar Capital, a £14 billion manager backed by the Cayzer family; socially-aware boutique Arisaig Partners, Ben Goldsmith’s Wheb Asset Management, Norwegian manager Storebrand, and US advisory firm Trillium Asset Management.
Its initiative follows warnings by Larry Fink, chief executive of BlackRock, that climate change has become the biggest single issue faced by the finance sector. A survey of family offices by UBS says 53% of its respondents agree. Rockefeller Asset Management has joined forces with the UN Environment Finance Initiative to model the risks.
Impact-cubed offers a service which drills down into the contents of portfolios to assess their sustainable returns.
Its new checking tool is seeking clients who want to comply with the European Union’s new sustainable finance taxonomy. It will hold managers to account on their promises to meet the standard when it is introduced in December 2021.
Impact-cubed also offers a service benchmarked on United Nations Sustainable Development Goals (SDG) together with customised approaches.
It seeks to score contributions to 14 factors like water efficiency, carbon limits, waste control, gender equality, executive pay, board independence, social harm and tax contributions.
They are used to express social returns for assets, or collection of assets, which for comparison with outputs for index, or green, benchmarks. Its techniques are likely to chime with a new generation at family offices who want to make sure their parents’ portfolios are truly sustainable.
Impact-cubed has used SDG reference points for an analysis of a portfolio managed for the Nobel Foundation which awards annual prizes to noteworthy individuals in line with the wishes of its Swedish founder Alfred Nobel.
It found Nobel’s exposure to sustainability was positive and a relieved foundation wants to repeat the exercise every six months. The Church of Finland and Nordic pension schemes have also used the methodology.
Impact-cubed was spun off from Auriel Equity Investors, a green-bias hedge fund, in 2017. Auriel was started in 2004 by Larry Abele after quitting as global head of quant at Deutsche Asset Management.
Concerns are growing that companies are promising to deliver a sustainable performance, but failing to deliver. Global standards on waste management and food hygiene are set to become tougher as a result of the coronavirus crisis.
Family Capital reviewed a report delivered by the Alliance for Corporate Transparency which showed that European companies, and finance companies, are failing to live up to their promises on climate change.
A white paper published by Impact-cubed last year analysed the social returns of 25 funds billed as complying with environmental, social and governance issues.
It found a disturbing lack of compliance: “The highest performer in our sample used 11% of their risk budget on sustainability, with figures around the 4-5% mark most common.”
Some ESG funds were less sustainable than an index benchmark. Investment consultants like Willis Towers Watson are demanding that ESG is embedded in portfolio management to ensure that greenwash is not taking place.
And Impact-cubed is out to supply the final proof statement.