Challenges with the ASIP ESG Reporting Standard

Overview of the ASIP ESG Reporting Standard

The ASIP ESG Reporting Standard was developed to provide institutional investors with clear and transparent reporting on their ESG (environmental, social and governance) performance. The aim is to ensure that pension funds fulfil their responsibility towards their beneficiaries in the area of ESG – the keyword here being fiduciary duty of care.

Creation of reports for our various clients

Preparing an ESG report according to the ASIP standard is a complex process that requires several steps and collaboration with various stakeholders. Here are the main steps we go through in our process:

1. Inventory data and stewardship data from the customer

The first step in the reporting process is to obtain the necessary inventory data and stewardship data directly from our customers. This data forms the basis for valuation and analysis. Our clients are pension funds, asset managers and banks, all of whom have specific data requirements.

2. ESG assessment of the data

Once we have received the portfolio data and stewardship data, we analyse it using ESG data. This assessment enables us to analyse the ESG performance of the individual investments and understand where potential risks and opportunities lie.

3. Look-through with funds

For funds, we apply the so-called look-through approach. This means that we analyse and evaluate the underlying investments within a fund in order to enable a detailed ESG analysis at the entire investment level.

4. Property funds and service providers

IIn the area of property funds, we rely on service providers who can provide such data aggregated at fund level. One example of this is Alphaprop, a company that provides specialised data for real estate funds. This data is crucial for ensuring a comprehensive ESG assessment in the property sector as well.

5. Aggregation and automated reporting

All the data collected and analysed is then aggregated to the level of total assets using our automated Cinnamon Investment Platform. This platform enables us to generate and deliver the ESG report automatically. Automation saves time and minimises errors, resulting in greater accuracy and efficiency.

Challenges in data procurement

Lack of a central provider for stewardship data

In the area of stewardship, there is currently no provider on the market that centrally collects the voting behaviour of funds. This makes it considerably more difficult to evaluate and analyse stewardship performance.

Expensive Benchmark Constituent licences

The licences for benchmark constituents are expensive, which drives up the cost of data procurement. Our customers bear these costs themselves because the index providers insist on end customer contracts.

Low level of coverage of foreign properties

The coverage of foreign property is low. This means that for many foreign property investments we do not have the necessary data to carry out a comprehensive ESG assessment.

Methodological issues in the initial calculation

When calculating the ESG report in accordance with the ASIP standard for the first time, methodological questions arose that we had to clarify directly with the authors of the standard. These clarifications were crucial to ensure that our calculations met the requirements of the standard. Our ESG partner PwC makes a decisive contribution to quality. PwC provides us with regulatory guidance and validates our calculations.

Conclusion

The implementation of the ASIP ESG Reporting Standard presents us with numerous challenges, particularly in the area of data procurement. However, by working closely with our clients and service providers and using our automated platform, we are able to produce high-quality ESG reports and thus make a valuable contribution to the transparency of our clients’ ESG investing.