Investors increase pressure on alternative managers to upgrade ESG reporting requirements

While business-as-usual activities such as fundraising, performance, deal flow and regulatory compliance remain central to alternatives managers, Environmental, Social and Corporate Governance (ESG) has rapidly developed into a multi-stakeholder, mission-critical issue dominating the global corporate and political agenda.

Investor demands for clear ESG and sustainability strategies to be implemented by private capital managers are very likely to escalate further in significance across 2021 and beyond – particularly in the wake of the Covid-19 pandemic.

The impact on managers is manifold. Regulations are adapting to reflect the broad ESG focus, for instance. Investors are increasingly reallocating to ESG-positive assets. Analysts and other key commentators are questioning investment strategies that do not consider ESG. And reporting requirements – particularly on data and data analytics – are pivoting towards ESG.

‘The time for excuses is over’

This means that, unsurprisingly, many firms are now prioritising ESG as a competitive differentiator. Ritesh Rathi, Executive Vice President at Intertrust Group, comments: “ESG has become a major industry factor for private capital managers but it is still in the process of formalising. The time for excuses is over, however, and the expectation now is that managers will get their ESG act together.”

“Funds are keen to track and meet with ESG requirements as investors demand greater compliance with ESG. It is a virtuous circle, with more monitoring, reporting and due diligence. Intertrust Group is very well placed to help them meet these criteria – it is a competitive advantage for us. Our development team can provide bespoke custom reporting and as stakeholders look to realise opportunities, we see a very strong argument for outsourcing.”

“Much of the focus, in terms of best practice, is on technology, automation and process optimisation. These are the things that are uniting much of the market and the underlying dynamics shaping its future, including the focus on data. And we believe this very much plays into Intertrust Group’s strengths.”

Gearing up for reporting demands

Greater analytics will be vital to offering compelling products as well as a client proposition that accommodates ESG. Without the underlying data, many firms could be exposed to damaging criticism and a failure to meet standards or stakeholders’ expectations.

Rathi adds: “In terms of reporting, investors are becoming more demanding. They are looking for more granular detail, for example performance data that’s accessible on a regular basis not just quarterly or annually. There are areas where managers need clear support such as multi-dimensional reporting, reporting on external entities, historical reporting. Analytics have become key.”

Jonathan White, Commercial Director – Funds at Intertrust Group, adds: “In the context of ESG, we believe managers will increasingly need to work with outsourcers and specialists. Many are looking for very specific, customised opportunities. Where there is complexity and a need for customised data, firms such as Intertrust Group will increasingly be central in helping managers fulfil requirements – particularly as transparency is central to the ESG story.”