Source: NN Investment Partners
Transparency has evolved in recent years from a fun extra to an essential part of sustainable investing. At asset manager NN IP, it has been a spearhead for some time. ‘We want to know exactly how each ESG score is calculated.’
For those who want to invest sustainably, the right data is crucial. Data that indicates which companies are on track to achieve climate goals, for example, or that shows for those who are serious about diversity.
Asset manager NN IP makes every effort to obtain high-quality data and to share it with its clients. “It’s easy to pay lip service to the principles of responsible investing, but without robust reporting, that’s all there is to it,” says Isobel Edwards.
As an analyst at NN IP, she specialises in green bonds. They continue to gain popularity in recent years, even though more and more sustainability products are coming onto the market from which the responsible investor can choose. ‘With green bonds, investors know exactly which project their money is going to, and that still appeals to them’, Isobel Edwards explains.
In order to offer these investors full transparency about the impact of the bonds, NN IP published a Green Bond Fund Impact Report for the first-time last year. Based on extensive datasets, the report shows exactly how well the bonds are doing in terms of climate protection. ‘It’s a powerful tool, because if you can talk about the amount of water saved, the extra capacity for renewable energy, the saved tons of CO2, then the impact of your portfolio is clear.’
Recalculate scores
It takes a lot of effort to be able to offer transparency at that level, says Isobel Edwards. ‘If companies cannot or do not want to provide certain data, we turn to third parties who collect data, often commercial companies.’
‘But we also carry out our own screening for this. Because depending on the provider, a company can get a different ESG score (Environmental, Social, Governance). So we don’t just enter that data into our databases, but we see if we can agree with the methodology behind it. If not, we apply our own calculations. We want to know exactly how each score came about.’
It is not the only way in which NN IP strives for the highest possible transparency in terms of sustainability. For the funds, there is a comprehensive environmental report for criteria such as water, waste and carbon. And in a first annual report, the own strategy and policy on climate-related risks and opportunities are explained.
European regulations help
New European regulations require more transparency from companies, which helps NN IP in its mission. ‘There is now a whole stream of information coming our way that helps us to assess our green bonds even better. Because some activities are green anyway, but for others it depends on the way in which that activity happens. And we need to know that.’
In recent years, Isobel Edwards has seen transparency become one of the most important pillars of responsible investment. ‘It’s not just a nice extra anymore. In the past, it was already considered fine if a company did ESG. Now investors want to know who is really doing something, with the evidence on the table. Those who are not transparent can then get into trouble. That prompts many companies to take action, and that can only benefit our customers.’
Disclaimer
This article is provided by NN Investment Partners, NN Investment Partners is responsible for the content and opinions. The information given in this article is for general information purposes only and is neither intended to provide legal or other professional advice nor does it commit NN Investment Partners and/or MeDirect Bank (Malta) plc to any obligation whatsoever. The information given is not intended to be a suggestion, recommendation, or solicitation to buy, hold or sell, any securities and is not guaranteed as to accuracy or completeness.
The financial instruments discussed may not be suitable for all investors and investors must make their own informed decisions and seek their own advice regarding the appropriateness of investing in financial instruments or implementing strategies discussed herein.
If you invest in any product, you may lose some or all the money you invest. The value of your investment may go down as well as up. A commission or sales fee may be charged at the time of the initial purchase for an investment. Any income you get from any investment may go down as well as up. Products may be affected by changes in currency exchange rate movements thereby affecting your investment return therefrom. The performance figures quoted refer to the past and past performance is not a guarantee of future performance or a reliable guide to future performance. Any decision to invest in a mutual fund and ETFs (Exchange traded funds) should always be based upon the details contained in the Prospectus and Key Information Document (KID), which may be obtained from MeDirect Bank (Malta) plc. MeDirect Bank (Malta) plc, company registration number C34125, is licensed to undertake the business of banking in terms of the Banking Act (Cap. 371) and investment services under the Investment Services Act (Cap. 370).