By Ivaylo Dimov, former Senior Consultant at Sancroft.
Attention to ESG has hit unprecedented levels among asset managers around the world in only a few short months.
ESG itself is nothing new, but what is changing is the now-widespread and rapidly deepening reliance on ESG to demonstrate a more comprehensive approach to risk and opportunity and to secure future access to capital.
From private equity houses, through infrastructure and real assets fund managers, to wealth managers, ESG is trending high in the world of private market investors, and increasingly used as a proxy for a firm’s or fund’s capacity to evolve and remain competitive and attractive.
ESG reporting and communications plays a leading role in our client work: it is essential for demonstrating, in a robust, professional and credible way, the ESG approach a firm has developed, how it adds value and is aligned with investors’ and clients’ expectations. Our experience over decades of working on ESG and sustainability reporting puts us in a good position to help our clients act quickly and give readers the tools to make well-informed decisions.
Our five top tips for first-time ESG reporters are as follows:
1.Focus on what matters. One of the most important decisions a firm can take about ESG reporting is to make a clear assessment of what is most important for the business and for investors’ needs. Understanding the which topics are material will lead to reports that are focused, streamlined, relevant and credible. Consider how you can use materiality analysis to help you determine what to focus on – starting with our report on best practices.
2. Be authentic. Make sure your ESG report reflects who you are as a firm, and what your investors expect of you. Focus on where ESG adds value to your investment thesis, and what differentiates you from the pack. It’s great to be inspired by what your peers are doing, but let the focus be on your convictions, your firm and your investment strategy, in your own voice.
3. Get senior management involved. Not only will it save time and effort later, engaging senior management early on will give you valuable strategic guidance on key messages your reporting will need to cover. Strong governance oversight of reporting is also needed to set the right tone from the top and ensure the ESG reporting process is aligned with and helps to embed ESG action and performance management throughout the business. And it’s a tangible way to channel your partners’ energy toward improving the profile of ESG across your offerings.
4. Make a plan. Don’t underestimate the time, effort and resources a full ESG reporting process will require. Especially for a first-time report, build in extra time for review and sign-off of drafts. Make note of whose input and review you will need to obtain, and set clear expectations for timing, roles and responsibilities. Reporting is always a team effort – you will need to manage multiple inputs to keep a complex project plan moving forward. Seek external expertise where you need it.
5. Own it. Determine ownership and editorial responsibility up front, to enable a consistent style and voice that reflects your firm’s identity. A style guide can be indispensable here, to maintain a consistent approach, in harmony with your annual report and other publications. Without an agreement on editorial control, it can be hard to keep to deadlines, and it becomes less likely that you will be able to stick to the overall plan. It’s best if a single individual is responsible for the final checks and polishing.
Once complete, your ESG report will give you a great set of tools for engaging with employees, clients, peers, investors, rating agencies and a whole host of other stakeholders – and the good news is you should find it a smoother and more straightforward process next time. Get in touch to hear about our experience in supporting ESG clients, and let us see how we can help you take that all-important first step.