By Thomas Tscherrig

ESG reporting for asset managers and asset owners

18. February 2022
Client Reporting

In a previous blog article on Sustainability in Finance – ESG and Co. we addressed terms such as Environment, Social and Governance (ESG), Sustainable Development Goals (SDG), Impact Investing, etc. and answered the question whether sustainability will fundamentally change the financial sector in the affirmative. Our market analysis has shown that there are no good ESG reports. So it was clear that we wanted to develop one.

ESG reporting for client portfolios, funds and mandates

What trends have we taken into account in the ESG Report?

The regulatory thrust is given: Disclosure obligations increase transparency and the data is available to all through publicly accessible databases. This is good news for investors: they will soon be able to assess much better where ESG risks lurk and where opportunities arise. For us, this means developing report elements without excessive consideration of the current data situation. It was also obvious to integrate the SFDR and the EU Taxonomy into the report. Similar regulations will soon come to Switzerland.

Content implementation and visualisation of the ESG report

Investors approach the topic of sustainability through two different lenses: They integrate ESG into their investment process out of traditional risk considerations or they want to change the world for the better – in many cases both at once. The view of the portfolio is different (see also Risk vs. Impact). Apart from that, the issue of global warming is particularly important to most investors. These considerations resulted in the main structure of the report: ESG Risk, Climate and Impact.

View ESG sample report

The next step with regard to the presentation in the Investment Report was the further structuring and visual presentation of these topics. We drew on the expertise of our long-standing partner Nerves, a design agency in Zurich. We decided to create a general overview first. In the example of ESG, this is reflected in an overall assessment of risk, as well as individually in the areas of Environment (E), Social (S) and Governance (G). A detailed list shows the Principle Adverse Impact (PAI) indicators. These indicators focus on the extent to which investment objects have a negative impact on the environment, social and labour concerns or human rights.

Another aspect of the risk assessment in the report is the controversial issues in which the companies in the portfolio are involved. These issues can negatively affect a company’s risk in the short or long term and thus contribute to the risk of the portfolio. Since for most investors CO2 emissions due to climate change are one of the most important risk aspects of ESG, we have decided to visualise these key figures and information graphically in a separate chapter of the report.

Risk versus impact

When considering risk, the investor is concerned with quantifying the potential financial damage to her portfolio that she incurs as a result of ESG risks. This is not about noble sustainability goals, but about tangible financial interests. The investor expands her risk model by means of ESG and is thus more holistic in her approach.

Impact is about making a real and hopefully measurable difference to the world. Financial impacts on his portfolio are secondary in this view. Instead, he wants to know, for example, whether his portfolio satisfies world hunger or contributes to climate mitigation.

The impact section focuses on the 17 Sustainable Development Goals. Here we show whether or not portfolio holdings contribute to these goals. Another component is the “EU Taxonomy”, with the sustainable activities defined by the European Union. The EU Taxonomy for Sustainable Activities is a classification system that clarifies which investments are environmentally sound under the European Green Deal. Proxy voting and engagement are other topics that are graphically illustrated in the report. Proxy voting is the practice of investors actively exercising their voting rights at annual general meetings of companies. Either ESG and/or traditional issues are taken into account. Engagements are all interactions between an investor and an investee company or policy makers that address ESG issues or corporate strategy. The objective of an engagement is to monitor the performance or influence the practices of a company in relation to ESG issues.

To be sure that the graphics and tables do not leave any room for interpretation, we have added info texts to the report elements. These describe the details of the respective graphs, tables and calculations.

ESG data and information

In order to create an investment report from an ESG and SDG perspective, the corresponding data is required. But how reliable are they and who supplies them?

At the beginning of the supply chain are the companies themselves. To improve the consistency and comparability of non-financial information disclosed across the EU, companies (with more than 500 employees and of public interest) are required to include a non-financial statement (sustainability report) in their annual report. This report contains information on environmental issues, social and labour issues, respect for human rights, and the fight against corruption and bribery. This information is reported partly as qualitative and partly as quantitative data.

One of the main consumers of these sustainability reports in the form of raw data are data providers such as Sustainalytics (Morningstar), MSCI and S&P Global. These firms now specialise in ESG and SDG research and normalise data so that investments are comparable in terms of sustainability metrics. Another supplier of data providers are NGOs (non-governmental organisations), which provide additional information on companies. These are mainly controversies in which the companies are involved.

The differences in the way providers calculate ESG ratings can result in the same company being rated as good by one provider and rather poor by another. Investors therefore need to ensure that the approach of the rating provider they rely on is consistent with their ESG preferences, otherwise they run the risk of constructing portfolios that are not in line with their ESG views.

Would you like to learn more about ESG reporting?

  • Would you like to offer ESG reporting to your clients and prospects? Take advantage of our service. Find out more on our ESG website.
  • What is the difference between the ESG Web Report and the ESG Print Report? View our ESG Web Report and our ESG Print Report.
  • Contact Thomas Tscherrig at or +41 44 454 84 84 for a consultation.

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