FIX EMEA Trading Conference: Standardisation of ESG key for investors

Dan Barnes Welcome to ETF TV, I’m Dan Barnes. Joining us today is Rebecca Healey, co-chair of FIX EMEA. We’re going to be talking about the ESG issues, which will be debated at the upcoming FIX Global Conference in September.

Deborah Fuhr I’m Deborah Fuhr from ETF TV, and today we’re going to be discussing how social movements and the pandemic have raised the awareness of ESG as investment risk, investors should be aware of. Welcome, Rebecca.

Rebecca Healey Thank you for having me.

Deborah Fuhr So what are the key topics and issues that you will be discussing at the FIX meeting about ESG?

Rebecca Healey With the US and Europe now claiming to lead the charge on new regulations around ESG, one of the topics that we will be discussing is what exactly the new rules are and the challenges they will create for the industry. We wrote a report last summer where we noticed that 70% of responding firms had a commitment to incorporate ESG across all investment products. And since then, we’ve had the flight shame movement in Scandinavia, we’ve had climate change risks, COVID-19, as you mentioned, but also Black Lives Matter. And all of this has really pulled ESG from a niche investment strategy into mainstream investing.

So the problems that we’ve had in the past with ESG data, which we all know about in terms of the scarcity of the data, that in itself is one issue. Now, of course, you’re moving that particular issue onto steroids, given the mainstream appetite for ESG across all investment strategies.

Deborah Fuhr I think we’re also seeing regulators react to ESG in different ways, which also causes confusion for the investors.

Rebecca Healey It would appear from again, going back to the report that we wrote last year, there’s a lot of movement within Europe. They’ve clearly started the march in terms of ESG, and that has moved on again with the new regulation that we’re seeing coming out on sustainable finance disclosure regulation, because people now have to complete new disclosure reports against 34 principal adverse impacts, that again has shifted the data requirement. But you’re 100% right. You’ve got conflicting guidance from the SEC, you’ve got the UK sort of post Brexit, also looking to make a stand here. So managing the new regulation within a shifting, global, regulatory policy is one of the reasons why it’s so important that the industry gets together to understand; what’s required from the disclosure agreements currently? How can that data best be accessed? But it’s really now about implementing standards around how the data should be incorporated. If you’re a cocoa farmer fx, is your water disclosure as important as a health care company that’s based in Europe? There are very different requirements and I think it’s now down to the industry to actually look at what’s required and how best to deliver it.

Deborah Fuhr I totally agree. I think the challenges are finding a lot of firms trying to collect data and the collection is not consistent and that makes it very difficult and a big burden on companies to report.

Rebecca Healey But it’s also the lack of data standards to compare the data, and I think this is where perhaps the industry can get together in terms of trying to understand the different methodologies that underpin the third-party scoring mechanisms. You know, ‘how do you take that particular scoring mechanism and incorporate it with another scoring mechanism?’ And things like the SASB Materiality Map have obviously made great strides in that particular area. But again, it’s taking that information and putting it in an electronic format that can be passed throughout the system, which is where I think FIX has a potential opportunity to actually work with the data providers, but also with the buy-side that actually need to incorporate that data.

Dan Barnes And Rebecca, who can we expect to hear from at the FIX Conference?

Rebecca Healey Well, we’ve been very fortunate that Patrik Karlsson, who’s the policy officer at ESMA,in charge of ESG and sustainable finance, he’s joining us on the panel along with John Marsland of Schroders, Torun Reinhammar from CDP, who’s been heavily involved in the data provision in this area. We’ve also got good representation from the US as well, which I think is key given the fact that the US asset management is trying to incorporate ESG within that global context. So joining us, we’ve got Ty Gallasch from Healthy Markets, and also Hank Erbe, who is global head of public policy at Fidelity.

Dan Barnes Rebecca, thank you.

Rebecca Healey Thank you.

Dan Barnes I’d like to thank Rebecca for her insights and of course, you for watching. To catch up on our other shows, go to ETFTV.NET and TRADERTV.NET, and we’ll see you at the FIX Conference in September.

Published on September 2, 2020